WARRANTS | WARRANTS The Company effected the Reverse Stock Split on July 31, 2023, pursuant to which every 50 shares of the Company’s common stock was combined into one share. The number of underlying shares and the exercise price of each of the Company’s warrants were proportionately adjusted to give effect to the Reverse Stock Split. The Reverse Stock Split had no effect on the accounting for the Company’s warrants. 2022 Warrants On March 30, 2022, the Company entered into a Securities Purchase Agreement with certain investors. Pursuant to the Securities Purchase Agreement, the Company agreed to issue and sell in a private placement, or the 2022 Private Placement, up to 942 thousand shares of the Company’s common stock and warrants, or the 2022 Warrants, to purchase up to 470 thousand shares of common stock. The securities were sold at two closings at a price per share of $50.13. At the first closing on April 4, 2022, the Company sold 75.2 thousand shares of common stock and 2022 Warrants to purchase up to 376 thousand shares of common stock, for gross proceeds of $40.0 million before deducting placement agent commissions and other offering expenses. The 2022 Warrants issued on April 4, 2022 had a fair value of $9.2 million, a 5 year term and a per share exercise price of $62.50. A second and final closing occurred on July 1, 2022, at which the Company sold an additional 188 thousand shares of common stock and 2022 Warrants to purchase up to 94.0 thousand shares of common stock, for gross proceeds of $10.0 million before deducting placement agent commissions and other offering expenses. The 2022 Warrants issued on July 1, 2022 had a fair value of $4.5 million, a 5 year term and a per share exercise price of $62.50. None of the 2022 Warrants have been exercised or expired as of June 30, 2023 and December 31, 2022. The 2022 Warrants meet equity classification requirements and therefore are classified in our stockholders’ equity. 2023 SVB Warrants On February 10, 2023, as part of the First Amendment to the Loan and Security Agreement with Silicon Valley Bank ("SVB") (see Note 8), the Company issued warrants, or SVB Warrants, to purchase up to an aggregate of 4 thousand shares of common stock at a per share exercise price of $16.37, with an expiration date of February 10, 2035. The number of shares and the exercise price were subject to adjustment, or the Special Adjustment for Warrant Shares, upon the occurrence of the last closing of the Company’s next equity financing, as set forth in the SVB Warrants. On March 9, 2023, the Company entered into the 2023 Purchase Agreement, with certain institutional investors, pursuant to which the Company sold securities in a private placement at two closings that constituted the Company’s next equity financing within the meaning of the SVB Warrants. The first closing occurred o n March 13, 2023 and the second closing occurred on June 16, 2023. On June 16, 2023, pursuant the Special Adjustment for Warrant Shares, the number of shares of common stock underlying the SVB Warrants increased to 5.4 thousand and the per share exercise price decreased to $10.25. Upon the grant date, February 10, 2023, the fair value of the SVB Warrants was approximately $57 thousand measured using the Black-Scholes option pricing model. The SVB Warrants met equity classification requirement under ASC 815 - Derivative and Hedging, specifically due to the warrants having a limit on the number of shares the Company is required to deliver upon exercise and the warrant not including cash-settled top-off or make-whole provisions, as well as, other conditions. As such, the SVB Warrants met the equity classification requirements and are classified in the Company's stockholders' equity. None of the SVB Warrants have been exercised or expired as of June 30, 2023. The key input assumptions utilized in the valuation of the SVB Warrants were as follows: Grant date Market price $16.00 Exercise price $16.37 Term (Years) 12 Volatility 85% Risk Free Rate 3.68% 2023 Pre-Funded and Series A Warrants As noted above, on March 9, 2023, the Company entered into the 2023 Purchase Agreement with certain investors. Pursuant to the 2023 Purchase Agreement, the Company agreed to issue Pre-Funded Warrants and Series A Warrants. On March 13, 2023, at the first closing of the offering, the Company sold at a price of $16.06 per underlying share, Pre-Funded Warrants to purchase up to 996.3 thousand shares of common stock at an exercise price of $0.05 per share for total gross proceeds of approximately $16.0 million, before deducting offering expenses. The Company intends to use the net proceeds from the offering to fund costs associated with restructuring, repay outstanding debt, and finance its growth initiatives related to its MedCenter technology business. The number of Pre-Funded Warrants exercisable by investors was limited to 19.99% of the Company’s common stock outstanding immediately prior to the offering pursuant to a listing rule of The Nasdaq Stock Market, which required that the Company obtain stockholder approval of the issuance of shares above this 19.99% cap. The Pre-Funded Warrants were classified as a liability at issuance due to the need for the Company to obtain stockholder approval to settle the instruments in shares. On March 9, 2023, the Company also agreed to issue Series A Warrants to purchase up to 996.3 thousand shares of common stock with an exercise price of $19.27 per share, which was conditional upon the Company obtaining stockholder approval of the issuance. The Series A Warrants were also classified as a liability as the Company had an irrevocable obligation to obtain stockholder approval of the issuance of the Series A Warrant, and as such did not have sufficient shares to settle the obligation and consequently failed the equity classification requirements pending shareholder approval. On June 14, 2023, at its annual stockholders’ meeting, the Company obtained the requisite stockholder approval for removal of the exercise cap on the Pre-Funded Warrants and for issuance of the Series A Warrants. The Company issued the Series A Warrants on June 16, 2023. Upon grant, March 13, 2023, the fair value of the Pre-Funded Warrants and Series A Warrants was $15.9 million and $10.5 million, respectively. The Company recorded the $10.4 million difference between the offering proceeds and grant date fair value as a loss on issuance of warrants in the statement of operations and comprehensive loss. Subsequent to its grant date fair value measurement, and through June 14, 2023, the Company remeasured the warrants at fair value and recognized a gain from change in fair value of warrants on the statement of operations and comprehensive loss. As of June 14, 2023, the fair value of Pre-Funded Warrants and Series A Warrants was $14.9 million and $9.3 million, respectively. For the three and six months ended June 30, 2023, the Company recognized a loss of $0.9 million and gain of $2.1 million in fair value remeasurement of the Pre-Funded Warrants and Series A Warrants, respectively. Subsequent to the remeasurement of the Pre-Funded Warrants and Series A Warrants, the Company reassessed the liability classification of these warrants due to the Company obtaining on June 14, 2023, stockholder approval for removal of the exercise cap on the Pre-Funded Warrants and for issuance of the Series A Warrants. The Company determined that the Pre-Funded Warrants and Series A Warrants met the equity classification requirements, and the warrants were re-classified from liability to equity as of June 14, 2023. The fair values of the Pre-Funded Warrants and Series A Warrants were measured using the Black-Scholes option pricing model. As of the grant date and June 14, 2023, the key input assumptions utilized in the valuation of the Pre-funded Warrants were as follows: Grant date June 14, 2023 Market price $16.00 $15.00 Exercise price $0.05 $0.05 Term (Years)* IDF IDF Volatility 85% 82% Risk Free Rate 3.70% 3.90% *Warrant is outstanding until fully exercised; as such, the term was measured as indefinite. The key input assumptions utilized in the valuation of the Series A Warrants were as follows: Grant date June 14, 2023 Market price $16.00 $15.00 Exercise price $19.27 $19.27 Term (Years) 5 4.7 Volatility 85% 82% Risk Free Rate 3.68% 4.10% Reverse Stock Split On June 14, 2023, the stockholders of the Company approved a one-for-fifty reverse stock split of its outstanding shares of common stock. The reverse stock split became effective at 5:00 p.m. Eastern Time on July 31, 2023 (the “Effective Time”). At the Effective Time, every fifty issued and outstanding shares of the Company’s common stock were converted into one share of the Company’s common stock. The reverse split affected all the stockholders uniformly and did not affect any stockholder’s percentage ownership interests in the Company or proportionate voting power. Each common stockholder held the same percentage of the outstanding common stock immediately following the reverse split as that stockholder did immediately before the reverse split, except for minor adjustments as a result of the treatment of fractional shares. No fractional shares were issued in connection with the reverse stock split. Stockholders who otherwise would be entitled to receive fractional shares of common stock will be entitled to receive their pro rata portion of the net proceeds obtained from the aggregation and sale by the exchange agent of the fractional shares resulting from the reverse stock split (reduced by any customary brokerage fees, commissions and other expenses). As a result, the number of common shares outstanding was reduced from 80,693,517 immediately before the Effective Time to 1,613,870. There was no change in the number of authorized shares of the Company's common stock or preferred stock, or to the par value per share of common stock due to the reverse stock split. All per share amounts and common shares outstanding for all periods presented in the unaudited consolidated financial statements have been adjusted retroactively to reflect the Company's one-for-fifty reverse stock split. After giving effect to the reverse stock split, the total number of shares of all classes of capital stock that the Company was authorized to issue was 310,000,000 shares, 300,000,000 shares of Common Stock, having a par value of $0.001, and 10,000,000 shares of Preferred Stock, having a par value of $0.001. |