Note 10 - Stockholders' Equity

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note 10– Stockholders’ Equity

 Conversion of Subordinated Debt to Equity

On August 13, 2020, the Company's Board of Directors approved a transaction to exchange 50%, or $1.25 million, of our subordinated debt with Cross River Partners, L.P., a related party, as well as $265,000 in accrued interest, for 403,602 shares of Company common stock. The total common stock fair value consideration was $963,000 and the Company recognized a gain of $552,000 in the consolidated statements of stockholders’ equity.

In a separate transaction on February 11, 2021, the Company exchanged the remaining 50%, or $1.25 million, of our subordinated debt with Cross River Partners, L.P., as well as $62,000 in accrued interest, for 601,674 shares of Company common stock, which was based on the price of Company common stock at market close on the date of the conversion. In addition, the Company awarded a warrant to Cross River Partners, L.P. to purchase up to 150,418 shares of the Company's common stock at an exercise price of $2.507 per share. The warrants had a grant-date fair value $2.02 per share and are exercisable beginning one-year from the issuance date on February 11, 2022 until February 11, 2026. The issuance of the warrant at its grant date fair value of $2.02 per share caused the Company to record a loss of approximately $304,000 upon the conversion of the subordinated debt on February 3, 2021.

Warrants

On November 11, 2019, in connection with a subordinated loan agreement, the Company granted Cross River one five-year warrant to buy an aggregate total of 41,667 shares of the Company's common stock at an exercise price of $3.00 per share. The warrants had a grant-date fair value $2.40 and were fully vested upon issuance and remain outstanding and exercisable until November 11, 2024.

On September 23, 2020, in connection with the Fifth Amendment, the Company granted East West Bank one five-year warrant to buy an aggregate total of 1,000,000 shares of the Company's common stock at an exercise price of $3.75 per share. The warrants had a grant-date fair value of $1.42, were fully vested upon issuance and remain outstanding and are exercisable beginning one-year from the issuance date on September 23, 2021 until September 23, 2025.

On February 11, 2021, in connection with the conversion of the subordinated loan agreement to Company common stock, the Company granted Cross River one five-year warrant to buy an aggregate total of 150,418 shares of the Company's common stock at an exercise price of $2.507 per share. The warrants had a grant-date fair value $2.02 and are exercisable beginning one-year from the issuance date on February 11, 2022 until February 11, 2026.

Each grant of warrants granted to Cross River was reviewed and approved by the independent directors of the Company.

On April 12, 2021, the SEC issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies ("SPACs") (the "Staff Statement"). The SEC highlighted accounting considerations which could, in certain circumstances, indicate that warrants should be accounted for as liabilities rather than equity instruments, in which case the warrants would be subject to fair value adjustments during each reporting period. Although the Staff Statement focused on SPACs, the same accounting considerations may apply to warrants issued by non-SPAC entities. Upon issuance of the Staff Statement, the Company performed further analysis on its population of warrants, which are listed above, giving consideration to the areas of concern noted in the Staff Statement. Upon this further review of its warrant agreements, the Company determined that it has correctly accounted for its warrants as equity instruments.

A summary of warrant activity for the six months ended June 30, 2021 is as follows (amounts in thousands): 

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual
Warrants	Shares			Price		Life (Years)
Outstanding at December 31, 2020		1,043,667		$	3.73		4.7
Issued		150,418			2.51		4.2
Expired		(2,000	)		10.50		-
Outstanding at June 30, 2021		1,192,085		$	3.57		4.3
Exercisable at June 30, 2021		41,667		$	3.00		3.4