Quarterly report pursuant to Section 13 or 15(d)

Warrants and Derivative Liabilities

v3.23.1
Warrants and Derivative Liabilities
 3 Months Ended
Mar. 31, 2023
Warrants and Rights Note Disclosure [Abstract]  
Warrants and Derivative Liabilities Warrants and Derivative LiabilitiesThere are significant judgements and estimates inherent in the determination of the fair value of the Company’s warrants. These judgements and estimates include assumptions regarding the Company’s future operating performance and the determination of the appropriate valuation methods. If the Company had made different assumptions, the fair value of the warrants could have been significantly different (Note 2).
Warrants
Warrants vested and outstanding as of March 31, 2023 are summarized as follows:
Source Exercise
Price		 Term
(Years)		 Number of
Warrants
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 
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 
2022 Common Stock Warrants to Service Provider 0.04  2 2,000,000 
November 2019 EHT Common Stock Warrants 0.29  5 8,552,630 
November 2019 EHT Common Stock Warrants 0.15  5 945,750 
December 2019 EHT Common Stock Warrants 0.15  5 20,172,409 
February 2020 EHT Common Stock Warrants 0.10  3 22,135,132 
Total warrants outstanding as of March 31, 2023 177,093,146 
As of March 31, 2023, all of the Company's warrants are fully vested with the exception of the "2022 Common Stock Warrants to Service Provider."
February 2023 Sciences Warrant Exercises
Effective February 16, 2023, Company and Emerald entered into a Master Transaction Agreement (the "MTA"). Under the MTA, Emerald agreed to exercise 16,641,486 common stock warrants at $0.017 per share (the "MTA Warrants"). Under the MTA, the parties agreed that the aggregate proceeds from the exercise of the MTA Warrants of $282,905 was to be paid through a reduction of the Amended Credit Agreement owed by the Company to Sciences (Note 6). On February 22, 2023, the Company issued 16,641,486 shares of common stock to Emerald in connection with the exercise of the MTA Warrants (Note 5).
Derivative Liability
During the three months ended March 31, 2023, the warrant shares underlying the Emerald Financing - warrant liability expired unexercised and the decrease in fair value during the three months ended March 31, 2023 was nominal.
The following table summarize the activity of the derivative liability for the period 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 $ 59,732  $ —  $ (43,655) $ —  $ 16,077 
Total derivative liability $ 59,732  $ —  $ (43,655) $ —  $ 16,077 
Emerald Financing Warrant Liability
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.
The warrant liability is valued at the balance sheet dates using the following assumptions:
December 31,
2022
Dividend yield —  %
Volatility factor 140.83  %
Risk-free interest rate 4.21  %
Expected term (years) 0.13
Underlying common stock price $ 0.02