Quarterly report pursuant to Section 13 or 15(d)

Common Stock, Stock Options and Warrants

v3.20.1
Common Stock, Stock Options and Warrants
6 Months Ended
Mar. 31, 2020
Stockholders' Equity Note [Abstract]  
COMMON STOCK, STOCK OPTIONS AND WARRANTS

5. COMMON STOCK, STOCK OPTIONS AND WARRANTS

 

Registered Direct/Private Placement Offerings

 

On April 3, 2019, the Company closed a registered direct offering with several institutional and accredited investors for the sale of 3,430,421 shares of common stock at $1.545 per share for gross proceeds of $5,300,001. Simultaneously, the Company also privately sold and issued 3,430,421 immediately exercisable two-year unregistered warrants to the investors with an exercise price of $1.42 per share. The Company paid the placement agent for the offering a fee of 7% of the gross proceeds totaling $371,000 and issued the placement agent 240,130 immediately exercisable two-year warrants with an exercise price of $1.93125 per share. The Company also reimbursed the placement agent for $85,000 in expenses and incurred $10,000 in other expenses. Net proceeds from the offering were $4,834,001. The estimated fair value of the 3,430,421 warrants issued to the investors was $2,709,467 and the estimated fair value of the 240,130 warrants issued to the placement agent was $169,854.

 

On September 27, 2019, Citius closed an underwritten at-the-market offering of (i) 6,760,615 units, each unit consisting of one share of common stock and one immediately exercisable five-year warrant to purchase one share at $0.77 per share, and (ii) 1,060,615 pre-funded units, each pre-funded unit consisting of one pre-funded warrant to purchase one share and one immediately exercisable five-year warrant to purchase one share at $0.77 per share. The pre-funded warrants included in the pre-funded units are immediately exercisable at a price of $0.0001 per share and do not expire. The offering price was $0.8951 per unit and $0.895 per pre-funded unit. The net proceeds of the offering were $6,290,335. The Company issued the underwriter immediately exercisable five-year warrants to purchase up to 547,486 shares at $1.118875 per share with an estimated fair value of $323,414. The estimated fair value of the 1,060,615 pre-funded warrants was $809,145, and the estimated fair value of the 7,821,230 warrants included in the units and the pre-funded units issued to the investors was $4,845,341. 

 

Common Stock Issued for Services

 

On February 13, 2019, the Company issued 125,000 shares of common stock for investor relations services and expensed the $117,500 fair value of the common stock issued.

 

On September 16, 2019, the Company issued 94,097 shares of common stock for investor relations services and expensed the $94,097 fair value of the common stock issued.

 

On November 4, 2019, the Company issued 186,566 shares of common stock for strategic consulting and corporate development services and expensed the $100,000 fair value of the common stock issued.

 

On February 10, 2020, the Company issued 150,000 shares of common stock for investor relations services and 136,000 shares of common stock for general advisory and business development advisory services. The Company expensed the $306,020 fair value of the common stock issued.

 

Stock Option Plans

 

Pursuant to its 2014 Stock Incentive Plan (the "2014 Plan") the Company reserved 866,667 shares of common stock for issuance to employees, directors and consultants. The Board of Directors (or committees and/or executive officers delegated by the Board of Directors) may grant stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and cash-based awards under the 2014 Plan. As of March 31, 2020, there were options to purchase an aggregate of 861,838 shares of common stock outstanding under the 2014 Plan, options to purchase 4,829 shares were exercised, and no shares remain available for future grants.

 

On February 7, 2018, our stockholders approved the 2018 Omnibus Stock Incentive Plan (the "2018 Plan") and the Company reserved 2,000,000 shares of common stock for issuance to employees, directors and consultants. Pursuant to the 2018 Plan, the Board of Directors (or committees and/or executive officers delegated by the Board of Directors) may grant stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and cash-based awards. As of March 31, 2020, there were options to purchase an aggregate of 1,890,000 shares of common stock outstanding under the 2018 Plan and no shares available for future grants.

 

On February 10, 2020, the Company's stockholders approved the 2020 Omnibus Stock Incentive Plan ("2020 Stock Plan"). The 2020 Stock Plan authorizes a maximum of 3,110,000 shares. The 2020 Stock Plan provides incentives to employees, directors, and consultants of the Company in form of granting an option, SAR, dividend equivalent right, restricted stock, restricted stock unit, or other right or benefit under the 2020 Stock Plan. As of March 31, 2020, there were no grants outstanding under the 2020 Plan and 3,110,000 shares available for future grants.

 

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Due to its limited operating history and limited number of sales of its common stock, the Company estimated its volatility in consideration of a number of factors including the volatility of comparable public companies through December 31, 2018. Since January 1, 2019, the Company has estimated its volatility using the trading activity of its common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The expected term of stock options granted, all of which qualify as "plain vanilla," is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee options, the expected term is the contractual term. 

 

A summary of option activity under the Company's stock option plans is presented below:

 

    Option
Shares
    Weighted-
Average
Exercise
Price
    Weighted-
Average
Remaining
Contractual
Term
  Aggregate
Intrinsic
Value
 
Outstanding at October 1, 2019     1,771,039     $ 4.03              
Granted     980,799       0.67              
Exercised                        
Forfeited or expired                        
Outstanding at March 31, 2020     2,751,838     $ 2.831     8.1 years   $ 40,092  
Exercisable at March 31, 2020     1,224,925     $ 5.13     6.7 years   $ 38,842  

 

On October 8, 2019, the Board of Directors granted stock options to purchase a total of 705,799 shares to employees, 125,000 shares to directors and 125,000 shares to consultants at $0.67 per share. On October 28, 2019, the Board of Directors granted stock options to purchase a total of 25,000 shares to a consultant at $0.55 per share. All of these options vest over terms of 12 to 36 months and have a term of 10 years.

 

Stock-based compensation expense for the six months ended March 31, 2020 and 2019 was $379,217 and $374,944, respectively.

 

At March 31, 2020, unrecognized total compensation cost related to unvested awards of $937,912 is expected to be recognized over a weighted average period of 1.7 years.

 

Warrants

 

As of March 31, 2020, the Company has reserved shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding:

 

    Exercise
price
    Number     Expiration Dates
Investor Warrants   $ 9.00       169,135     April 22, 2020 – September 14, 2020
Investor Warrants     9.00       307,778     November 5, 2020 – April 25, 2021
LMB Warrants     6.15       38,771     November 20, 2020 – March 2, 2021
LMB Warrants     7.50       73,883     August 18, 2020 – March 14, 2021
LMB Warrants     7.50       53,110     March 24, 2022 – April 29, 2022
Financial Advisor Warrants     3.00       25,833     August 15, 2021
2016 Offering Warrants     4.13       140,819     November 23, 2021 – February 27, 2022
2017 Public Offering Warrants     4.13       1,622,989     August 2, 2022
2017 Public Offering Underwriter Warrants     4.54       65,940     February 2, 2023
December 2017 Registered Direct/Private Placement Offering Investor Warrants     4.63       640,180     June 19, 2023
December 2017 Registered Direct/Private Placement Offering Placement Agent Warrants     5.87       89,625     December 19, 2022
March 2018 Registered Direct/Private Placement Offering Investor Warrants     2.86       218,972     October 2, 2023
March 2018 Registered Direct/Private Placement Offering Placement Agent Warrants     3.73       46,866     March 28, 2023
August 2018 Offering Investor Warrants     1.15       7,843,138     August 14, 2023
August 2018 Offering Agent Warrants     1.59       549,020     August 8, 2023
April 2019 Registered Direct/Private Placement Offering Investor Warrants     1.42       1,294,498     April 5, 2021
April 2019 Registered Direct/Private Placement Offering Placement Agent Warrants     1.93       240,130     April 5, 2021
September 2019 Offering Investor Warrants     0.77       2,793,297     September 27, 2024
September 2019 Offering Underwriter Warrants     1.12       547,486     September 27, 2024
February 2020 Exercise Agreement Warrants     1.02       6,298,673     August 19, 2025
February 2020 Exercise Agreement Placement
Agent Warrants
    1.28       440,907     August 19, 2025
              23,501,050      

  

During the six months ended March 31, 2019, 2,321,569 August 2018 Offering Pre-Funded Unit Warrants were exercised at $0.01 per share for net proceeds of $23,216.

 

In December 2019, 1,060,615 of the September 2019 Offering Pre-Funded Unit Warrants were exercised at $0.0001 per share for net proceeds of $106.

 

In January 2020, 1,315,715 of the September 2019 Offering Investor Warrants were exercised at $0.77 per share for net proceeds of $1,013,101.

 

On February 14, 2020, the Company entered into a warrant exercise agreement for an aggregate of 3,712,218 shares of common stock having an existing exercise price of $0.77 and 2,586,455 shares of common stock at a reduced exercise price of $1.02. In consideration for the exercise of the warrants for cash, the exercising holders received new unregistered warrants to purchase 6,298,673 shares of common stock at an exercise price of $1.02 per share, exercisable six months after issuance and which have a term of exercise equal to five years. The offering closed on February 19, 2020 and net proceeds were $5,013,930 after placement agent fees and offering expenses. The Company also issued warrants to purchase 440,907 shares to the placement agent. The placement agent warrants have identical terms to the investor warrant except that the exercise price is $1.275 per share. The estimated fair value of the 6,298,673 warrants issued to the investors was $5,360,465 and the estimated fair value of the 440,907 warrants issued to the placement agent was $367,022.

 

At March 31, 2020, the weighted average remaining life of the outstanding warrants is 3.79 years, all warrants are exercisable except for the February 2020 warrants, and there was no aggregate intrinsic value of the warrants outstanding. 

 

Common Stock Reserved 

 

A summary of common stock reserved for future issuances as of March 31, 2020 is as follows:

 

Stock plan options outstanding     2,751,838  
Stock plan shares available for future grants     3,110,000  
Warrants outstanding     23,501,050  
Unit purchase options outstanding     201,334  
Total     29,564,222