Quarterly report pursuant to Section 13 or 15(d)

Warrants and Derivative Liabilities

v3.22.1
Warrants and Derivative Liabilities
 3 Months Ended
Mar. 31, 2022
Warrants and Rights Note Disclosure [Abstract]  
Warrants and Derivative Liabilities Warrants and Derivative Liabilities
There are significant judgements and estimates inherent in the determination of the fair value of the Company’s warrants and derivative liabilities. These judgements and estimates include assumptions regarding the Company’s future operating performance, the time to completing a liquidity event, if applicable, and the determination of the appropriate valuation methods. If the Company had made different assumptions, the fair value of the warrants and derivative liabilities could have been significantly different (See Note 2).
Warrants
Warrants vested and outstanding as of March 31, 2022 are summarized as follows:
Source Exercise
Price		 Term
(Years)		 Number of
Warrants
Vested and
Outstanding
Pre 2015 Common Stock Warrants $ 1.00  10 1,110,000 
2015 Common Stock Warrants 5.00  10 100,000 
2016 Common Stock Warrants to Service Providers 1.15  10 40,000 
2018 Emerald Financing Warrants 0.10  5 3,400,000 
Emerald Multi-Draw Credit Agreement Warrants 0.50  5 7,500,000 
2019 Common Stock Warrants 0.35  5 8,000,000 
2020 Common Stock Warrants to Placement Agent 0.08  5 8,166,667 
2021 Inducement Warrants 0.15  5 21,166,667 
2021 Inducement Warrants to Placement Agent 0.19  5 1,481,667 
2021 Common Stock Warrants 0.09  5 77,777,779 
2021 Common Stock Warrants to Placement Agent 0.11  5 5,444,445 
Total warrants vested and outstanding as of March 31, 2022 134,187,225 
Derivative Liabilities
The following tables summarize the activity of the derivative liability for the periods indicated:
Three Months Ended March 31, 2022
December 31, 2021
Fair
Value of Derivative Liability
 Fair
Value of
Derivative
Liability		 Change in
Fair Value of Derivative
Liability		 Reclassification
of Derivative
to Equity
March 31, 2022
Fair
Value of Derivative Liability
Emerald Financing - warrant liability (1)
$ 59,732  $ —  $ (43,655) $ —  $ 16,077 
Current balance of derivative liabilities $ 59,732  $ —  $ (43,655) $ —  $ 16,077 

Three Months Ended March 31, 2021
December 31, 2020
Fair
Value of Derivative Liability
 Fair
Value of
Derivative
Liability		 Change in
Fair Value of Derivative
Liability		 Reclassification
of Derivative
to Equity
March 31, 2021
Fair
Value of Derivative Liability
Emerald Financing - warrant liability (1)
$ 38,567  $ —  $ 238,350  $ —  $ 276,917 
Total derivative liabilities $ 38,567  $ —  $ 238,350  $ —  $ 276,917 
Emerald Financing Warrant Liability (1)
The Emerald Financing Warrants were issued during 2018 in connection with the Emerald Financing, and originally contained a price protection feature. In connection with the August 2020 Financing, the exercise price was permanently set to $0.10. The warrants contain a contingent put option if the Company undergoes a subsequent financing that results in a change in control. The warrant holders also have the right to participate in certain subsequent financing transactions on an as-if converted basis.
The Company reviewed the warrants for liability or equity classification under the guidance of ASC 480-10, Distinguishing Liabilities from Equity, and concluded that the warrants should be classified as a liability and re-measured to fair value at the end of each reporting period. The Company also reviewed the warrants under ASC 815, Derivatives and Hedging/Contracts in Entity’s Own Equity, and determined that the warrants also meet the definition of a derivative. With the assistance of a third party valuation specialist, the Company valued the warrant liabilities utilizing the Monte Carlo valuation method pursuant to the accounting guidance of ASC 820-10, Fair Value Measurements. Beginning March 31 2021, the Company changed its valuation model for the Emerald Financing Warrant Liability to a Black-Scholes valuation method, as it was determined that a more simplistic model such as the Black-Scholes valuation method yields a substantially similar result as a Monte Carlo simulation due to the Company's current assumptions.
The warrant liability is valued at the balance sheet dates using the following assumptions:
March 31,
2022		 December 31,
2021
Dividend yield —  % —  %
Volatility factor 103.3  % 126.5  %
Risk-free interest rate 1.49  % 0.43  %
Expected term (years) 0.88 1.13
Underlying common stock price $ 0.04  $ 0.05