6. Warrants

The terms of the Warrants issued as a part of the Public Offering required that the Company obtain shareholder approval for an increase in authorized shares so that sufficient shares of common stock would be available before they became exercisable. Under ASC 480, Distinguishing Liabilities from Equity, the Warrants were classified as liabilities upon issuance. At issuance, the fair value of the Warrants were $2.249 million. On September 15, 2022, the shareholders voted and approved the increase in authorized shares and on September 23, 2022, they voted and approved a reverse stock split.  These approvals resulted in the Warrants becoming exercisable and the fair value of $3.675 million was reclassified to equity. The change in fair value from the issuance date until the date it was reclassified to equity totaled $1.425 million and was included in other income (expense) in the condensed consolidated statement of operations and comprehensive loss.

The fair value of the Warrant liability was determined using the Black-Scholes Option Pricing Model. A summary of the Company’s assumptions used in determining the fair value of the Warrants granted during the Public Offering is shown in the following table.

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The following is a summary of warrant activity for the Company’s equity-classified warrants for the nine months ended September 30, 2022 and 2021:

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