Quarterly report pursuant to Section 13 or 15(d)

Warrant Liabilities

v3.20.2
Warrant Liabilities
3 Months Ended
Jun. 30, 2020
Warrant Liabilities  
Warrant Liabilities

NOTE 7 – WARRANT LIABILITIES

 

In 2004, the Company issued warrants to various investors and brokers for the purchase of Series C preferred stock in connection with a private placement (the “Series C Warrants”). The Series C Warrants were subsequently extended and, upon closing of the reverse recapitalization transaction with Ritter, exchanged for warrants to purchase common stock of the Company, pursuant to the Series C Warrant terms as adjusted. The Series C Warrants were classified as liabilities, but had minimal fair value prior to the merger with Ritter.

 

In exchange for the Series C Warrants, upon closing of the merger with Ritter, the holders received warrants to purchase an aggregate of 4,713,490 shares of the Company’s common stock at $0.72 per share, subject to adjustment. As of June 30, 2020, the warrants have remaining terms ranging from 3.1 to 5.3 years. The warrants were determined to be liability-classified pursuant to the guidance in ASC 480 and ASC 815-40, resulting from inclusion of a leveraged ratchet provision for subsequent dilutive issuances.

 

The following table summarizes the warrant activity for the year ended June 30, 2020:

 

    Common Stock Warrants  
    Shares    

Weighted–

Average

Exercise

Price

   

Range of Exercise

Price

   

Weighted–

Average

Remaining Life (Years)

 
Total outstanding – March 31, 2020         $                  
Series C preferred stock warrants exchanged for common stock warrants upon reverse recapitalization     4,713,490       0.72                  
Forfeited                            
Expired                            
Granted                            
Total outstanding – June 30, 2020     4,713,490     $ 0.72                  
Exercisable     4,713,490     $ 0.72     $ 0.72       3.82  
Non-Exercisable         $     $        

 

The following table summarizes the warrant activity for the year ended June 30, 2019:

 

    Series C Preferred Stock Warrants  
    Shares     Weighted– Average Exercise Price     Range of Exercise Price     Weighted– Average Remaining Life (Years)  
Total outstanding – March 31, 2019     2,197,442     $ 2.23                  
Forfeited     (2,000     2.25                  
Expired                            
Granted                            
Total outstanding – June 30, 2019     2,195,442     $ 2.23                  
Exercisable     2,187,322     $ 2.23       $ 1.83 – $2.70       4.61  
Non-Exercisable     8,120     $ 2.25       $2.25       7.24  

 

The following table presents the Company’s fair value hierarchy for its warrant liabilities measured at fair value on a recurring basis as of June 30, 2020:

 

    Quoted                    
    Market     Significant              
    Prices for     Other     Significant        
    Identical     Observable     Unobservable        
    Assets     Inputs     Inputs        
Warrant liabilities   (Level 1)     (Level 2)     (Level 3)     Total  
Balance as of June 30, 2020   $ -     $ -     $ 16,201,400     $ 16,201,400  
                                 

 

The following table is a reconciliation for those items measured at fair value on a recurring basis using Level 3 inputs during the three months ended June 30, 2020:

 

Warrant liabilities   As of June 30, 2020  
Balance, beginning of period   $  
Fair value at issuance date      
Change in fair value included in the statement of comprehensive loss     16,201,400  
Balance, end of period   $ 16,201,400  

 

The value of the warrant liabilities based on a valuation received from an independent valuation firm was determined using a Monte-Carlo simulation.

 

The value as of the dates set forth in the table above, was based on upon following assumptions:

 

    June 30, 2020  
Stock price   $ 3.97  
Risk-free interest rate     0.17% — 0.32 %
Expected volatility (peer group)     81.00% — 87.00 %
Expected life (in years)     3.10 — 5.27  
Expected dividend yield     0.00 %
Number outstanding     4,713,490  
Warrant liabilities (current), end of period   $ 16,201,400