Quarterly report pursuant to Section 13 or 15(d)

Common Stock, Stock Options and Warrants

v3.19.1
Common Stock, Stock Options and Warrants
6 Months Ended
Mar. 31, 2019
Stockholders' Equity Note [Abstract]  
COMMON STOCK, STOCK OPTIONS AND WARRANTS

5. COMMON STOCK, STOCK OPTIONS AND WARRANTS

 

2017 Public Offering and Release Agreement

 

On November 7, 2017, the Company entered into a release agreement with the underwriter of the public offering that closed in August 2017. The Company had previously granted a right of first refusal to underwrite all equity and debt offerings for a period of twelve months following completion of the August 2017 public offering ("Right of First Refusal"). Under the release, the Company agreed to pay the underwriter $100,000 in cash and issue 60,000 shares of restricted common stock with a fair value of $257,400 in exchange for a full release from all obligations related to the Right of First Refusal. The Company expensed the $357,400 cost of the release agreement in November 2017.

 

Registered Direct/Private Placement Offerings

 

On December 19, 2017, the Company closed a registered direct offering with several institutional and accredited investors for the sale of 1,280,360 shares of common stock at $4.6925 per share for gross proceeds of $6,008,089. Simultaneously, the Company privately sold and issued to the investors 640,180 immediately exercisable five and a half year warrants with an exercise price of $4.63 per share. The Company paid the placement agent for the offering a fee of 7% of the gross proceeds totaling $420,566 and issued the placement agent 89,625 immediately exercisable five-year warrants with an exercise price of $5.8656 per share. The Company also reimbursed the placement agent for $85,000 in expenses and incurred $20,000 in other expenses. Net proceeds from the offering were $5,482,523. The estimated fair value of the 640,180 warrants issued to the investors was $2,407,276 and the estimated fair value of the 89,625 warrants issued to the placement agent was $316,071.

 

On March 29, 2018, the Company closed a registered direct offering with an institutional and an accredited investor for the sale of 669,504 shares of common stock at $2.985 per share for gross proceeds of $1,998,469. Simultaneously, the Company privately sold and issued to investors 669,504 immediately exercisable five and a half year warrants with an exercise price of $2.86 per share. The Company paid the placement agent for the offering a fee of 7% of the gross proceeds totaling $139,893 and issued the placement agent 46,866 immediately exercisable five-year warrants with an exercise price of $3.73125 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 $1,763,576. The estimated fair value of the 669,504 warrants issued to the investors was $1,679,482 and the estimated fair value of the 46,866 warrants issued to the placement agent was $110,511.

 

August 2018 Offering

 

On August 13, 2018, Citius closed an underwritten offering of (i) 5,521,569 units, each unit consisting of one share of common stock and one immediately exercisable five-year warrant to purchase one share with an exercise price of $1.15 per share, and (ii) 2,321,569 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 with an exercise price of $1.15 per share. The pre-funded warrants included in the pre-funded units are immediately exercisable at a price of $0.01 per share and do not expire. The offering price was $1.275 per unit and $1.265 per pre-funded unit. The net proceeds of the offering were $8,926,786. The Company issued underwriter warrants to purchase up to 549,020 shares with an exercise price of $1.59375 per share with an estimated fair value of $491,737. The underwriter warrants are exercisable following February 8, 2019 and expire on August 8, 2023. The estimated fair value of the 2,321,569 pre-funded warrants was $2,630,072, and the estimated fair value of the 7,843,138 warrants included in the units and the pre-funded units issued to the investors was $7,311,727.

 

Unit Purchase Options

 

On April 7, 2017, the Company issued a three-year Unit Purchase Option Agreement for 38,000 units at a purchase price of $9.00 per unit. Each unit consists of one share of common stock and a warrant to purchase one share of common stock at an exercise price of $9.00 per share which expires on the earlier of three years after exercise of the Unit Purchase Option Agreement or April 7, 2023.

 

On June 29, 2017, the Company issued a three-year Unit Purchase Option Agreement for 62,667 units at a purchase price of $9.00 per unit. Each unit consists of one share of common stock and a warrant to purchase one share of common stock at an exercise price of $9.00 per share which expires on the earlier of three years after exercise of the Unit Purchase Option Agreement or June 29, 2022. The Company estimated the fair value of the unit purchase option agreement at $193,860 and recorded it as a prepaid expense. The Company recorded an expense of $96,930 for this agreement during the year ended September 30, 2017 and expensed the remaining balance of $96,930 during the three months ended December 31, 2017.

 

Common Stock Issued for Services

 

On February 7, 2018, the Company issued 22,200 shares of common stock for services provided by two consultants and expensed the $88,800 fair value of the common stock issued. On April 1, 2018, the Company issued 10,000 shares of common stock for services provided by a consultant and expensed the $31,000 fair value of the common stock issued.

 

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.

 

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, 2019, there were options to purchase an aggregate of 856,039 shares of common stock outstanding under the 2014 Plan, options to purchase 4,829 shares were exercised, and 5,799 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, 2019, there were options to purchase an aggregate of 790,000 shares of common stock outstanding under the 2018 Plan and 1,210,000 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. During the three months ended March 31, 2019, the Company 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 2014 Plan and 2018 Plan is presented below:

 

   

Option

Shares

   

 

Weighted-

Average

Exercise

Price

   

Weighted-

Average

Remaining

Contractual

Term

   

 

 

Aggregate

Intrinsic

Value

 
Outstanding at October 1, 2018     1,601,039     $ 4.35       8.56 years     $ 173,291  
Granted     45,000       0.94                  
Exercised                            
Forfeited or expired                            
Outstanding at March 31, 2019     1,646,039     $ 4.25       8.11 years     $ 114,886  
Exercisable at March 31, 2019     772,331     $ 7.01       6.68 years     $ 93,820  

 

Stock-based compensation expense for the six months ended March 31, 2019 and 2018 was $374,944 and $504,687, respectively.

 

At March 31, 2019, unrecognized total compensation cost related to unvested awards of $1,058,798 is expected to be recognized over a weighted average period of 2.0 years.

 

Warrants

 

As of March 31, 2019, 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 and Placement Agent Warrants   $ 9.00       384,006     September 12, 2019
Investor Warrants     9.00       202,469     March 19, 2020 – September 14, 2020
Investor Warrants     9.00       307,778     November 5, 2020 – April 25, 2021
LMB Warrants     6.15       90,151     June 12, 2019 – March 2, 2021
LMB Warrants     9.90       8,155     September 30, 2019 – January 8, 2020
LMB Warrants     20.70       17,721     November 3, 2019 – March 6, 2020
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
Convertible Note Warrants     9.75       40,436     September 12, 2019
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       669,504     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
              12,871,623      

 

During the six months ended March 31, 2018, 40,834 of the Financial Advisor Warrants were exercised on a cashless basis resulting in the issuance of 16,547 shares of common stock and 272,767 of the August 2017 public offering warrants were exercised at $4.125 per share for net proceeds of $1,125,148.

 

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

 

At March 31, 2019, the weighted average remaining life of the outstanding warrants is 3.92 years, all warrants are exercisable, and the aggregate intrinsic value for the warrants outstanding was $2,117,647. 

 

Common Stock Reserved 

 

A summary of common stock reserved for future issuances as of March 31, 2019 is as follows:

 

Stock plan options outstanding     1,646,039  
Stock plan shares available for future grants     1,215,799  
Warrants outstanding     12,871,623  
Unit purchase options outstanding     201,334  
Total     15,935,795