Annual report pursuant to Section 13 and 15(d)

Warrants

v3.8.0.1
Warrants
 12 Months Ended
Dec. 31, 2017
Warrants and Rights Note Disclosure [Abstract]  
Warrants
Note 11 — Warrants
 
During the year ended December 31, 2017 and in connection with the Private Placement, investors received warrants to purchase 5,929,256 shares of common stock. The warrants have an exercise price of $2.41 per share and expire three years from the date of issuance. The placement agent also received 237,170 warrants to purchase shares of common stock as part of its placement agent fee. The placement agent warrant has an exercise price of $2.89 per share, is non-exercisable for 12 months and has a three-year term from the date of issuance. The warrants contain a provision to protect investors from potential future dilutive events, or a down-round provision. The Company elected to early adopt ASU 2017-11 and will recognize the value of the effect of the down-round provision, if and/or when triggered.
 
The warrants were sold with shares of common stock for $2.535 per unit. The unit price was allocated to the warrants and common stock based upon the pro rata fair market value of the securities, with the warrants valued using the Black-Scholes model. The allocated fair value of the warrants was estimated to be $4.7 million on the date of issuance. In addition, the placement agent warrant was valued at $249,440 on the date of issuance.
 
The assumptions used in the Black-Scholes model for these warrants are as follows:
  
Average risk-free interest rate
 
 
1.59
%
Expected dividend yield
 
 
—
%
Expected life
 
 
3 years
 
Expected volatility
 
 
65
%
 
A summary of the Company’s warrant activity and related information is as follows:
  
 
 
2017
 
2016
 
 
 
Warrants
 
Weighted
Average Exercise
Price
 
Warrants
 
Weighted
Average Exercise
Price
 
Outstanding at January 1
 
 
1,398,653
 
$
4.57
 
 
1,408,002
 
$
4.57
 
Granted
 
 
6,166,426
 
$
2.43
 
 
—
 
$
—
 
Exercised
 
 
—
 
$
—
 
 
(9,349)
 
$
3.48
 
Forfeited/Expired
 
 
(84,000)
 
$
6.25
 
 
—
 
$
—
 
Outstanding at December 31
 
 
7,481,079
 
$
2.79
 
 
1,398,653
 
$
4.57
 
 
The placement agent warrant was not exercisable until March 3, 2018. Otherwise, no warrants were unvested at December 31, 2017. The weighted average remaining life is 2.1 years.