Annual report pursuant to Section 13 and 15(d)

Common Stock, Stock Options and Warrants

v3.20.4
Common Stock, Stock Options and Warrants
12 Months Ended
Sep. 30, 2020
Stockholders' Equity Note [Abstract]  
COMMON STOCK, STOCK OPTIONS AND WARRANTS

6. COMMON STOCK, STOCK OPTIONS AND WARRANTS

 

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.

 

On April 6, 2020, the Company issued 50,000 shares of common stock for strategic consulting and corporate development services and expensed the $22,750 fair value of the common stock issued.

  

On September 8, 2020, the Company issued 101,174 shares of common stock for investor relations services and expensed the $100,000 fair value of the common stock issued.

 

Common Stock 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 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.

 

On May 18, 2020, the Company closed a registered direct offering with several institutional and accredited investors for the sale of 7,058,824 shares of common stock at $1.0625 per share for gross proceeds of $7,500,001. The Company also agreed to issue 3,529,412 unregistered immediately exercisable warrants to the investors with an exercise price of $1.00 per share and a term of five and one-half years. The Company paid the placement agent for the offering a fee of 7% of the gross proceeds totaling $525,000 and issued the placement agent 494,118 immediately exercisable warrants with an exercise price of $1.3281 per share and a term of five years. The Company also reimbursed the placement agent for $85,000 in expenses and incurred $12,901 in other expenses. Net proceeds from the offering were $6,877,100. The estimated fair value of the 3,529,412 warrants issued to the investors was $2,138,998 and the estimated fair value of the 494,118 warrants issued to the placement agent was $275,724.

 

On August 10, 2020, the Company closed an underwritten public offering of 9,159,524 shares of common stock at a price of $1.05 per share for gross proceeds of $9,617,500. The Company paid the underwriter a fee of 7% of the gross proceeds totaling $673,225 and issued the underwriters 641,166 immediately exercisable warrants with an exercise price of $1.3125 per share and a term of five years. The Company also reimbursed the placement agent for $135,000 in expenses and incurred $109,074 in other expenses. Net proceeds from the offering were $8,700,201. The estimated fair value of the 641,166 warrants issued to the underwriter was $569,426.

 

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. As of September 30, 2020, there were options to purchase 855,171 shares outstanding, options to purchase 4,829 shares were exercised, options to purchase 6,667 shares expired, and no shares were 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 September 30, 2020, there were options to purchase 1,890,000 shares outstanding and no shares available for future grants.

 

On February 10, 2020, the Company's stockholders approved the 2020 Omnibus Stock Incentive Plan ("2020 Plan"). The 2020 Plan authorizes a maximum of 3,110,000 shares. The 2020 Plan provides incentives to employees, directors, and consultants of the Company in the form of granting an option, SAR, dividend equivalent right, restricted stock, restricted stock unit, or other right or benefit under the 2020 Plan. As of September 30, 2020, there were options to purchase 645,000 shares outstanding under the 2020 Plan and 2,465,000 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 to employees and directors, 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.

 

The following assumptions were used in determining the fair value of stock option grants for the years ended September 30, 2020 and 2019:

 

    2020    2019   
Risk-free interest rate   0.26 – 1.66%   2.18 – 2.53%  
Expected dividend yield   0%   0%  
Expected term   6.50 – 10 years   6.50 – 10 years  
Expected volatility   107 – 117%   119 – 121%  

 

A summary of option activity under the plans is presented below:

 

    Shares     Weighted-
Average
Exercise
Price
    Weighted-
Average
Remaining
Contractual
Term
    Aggregate
Intrinsic
Value
 
Outstanding at September 30, 2019     1,771,039     $ 4.03                
Granted     1,625,799       0.89                
Exercised                          
Forfeited or expired     (6,667 )     9.00                
Outstanding at September 30, 2020     3,390,171     $ 2.51     8.00 years     $ 440,336  
Exercisable at September 30, 2020     1,507,141     $ 4.44     6.56 years     $ 72,566  

 

The weighted average grant date fair value of the options granted during the year ended September 30, 2019 was estimated at $1.04 per share. These options vest over terms of 12 to 36 months and have a term of 10 years.

 

The weighted average grant date fair value of the options granted during the year ended September 30, 2020 was estimated at $0.76 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 years ended September 30, 2020 and 2019 was $803,261 and $715,983, respectively.

 

At September 30, 2020, unrecognized total compensation cost related to unvested awards of $1,166,073 is expected to be recognized over a weighted average period of 1.90 years.

 

Warrants

 

The Company has reserved 26,831,989 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at September 30, 2020:

 

    Exercise
price
    Number     Expiration Dates  
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       38,673     November 2, 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 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 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  
May 2020 Registered Direct Offering Investor Warrants     1.00       2,400,000     November 18, 2025  
May 2020 Registered Direct Offering Placement Agent Warrants     1.33       494,118     May 14, 2025  
August 2020 Underwriter Warrants     1.31       641,166     August 10, 2025  
                       
              26,831,989        

 

During the year ended September 30, 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 warrants 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.

 

On June 26, 2020, 1,129,412 of the May 2020 Registered Direct Offering Investor Warrants were exercised at $1.00 per share for net proceeds of $1,129,412.

 

At September 30, 2020, the weighted average remaining life of all of the outstanding warrants is 3.55 years, all warrants are exercisable, and the aggregate intrinsic value for the warrants outstanding was $976,164.

 

Common Stock Reserved

 

A summary of common stock reserved for future issuances as of September 30, 2020 is as follows:

 

Stock plan options outstanding     3,390,171  
Stock plan shares available for future grants     2,465,000  
Warrants outstanding     26,831,989  
Total     32,687,160  

 

The three-year unit purchase options issued during the year ended September 30, 2017 expired during the year ended September 30, 2020.