Note 7 - Stockholders' Equity

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note 7 – 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, a related party, as well as $265,000 in accrued interest, for 403,602 shares of Company common stock. The total Company 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, 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 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 of $2.02 per share and are exercisable beginning one year from the issuance date on  February 11, 2022 until  February 11, 2026. The total fair value of the warrant and loss on extinguishment of the subordinated debt with this related party was $304,000, which was recorded to Other income (expense) in the first quarter 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 of $2.40, 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 and 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 Securities and Exchange Commission ("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 years ended December 31, 2021 and 2020 is as follows (in thousands):

						Weighted Average
				Weighted Average		Remaining
Warrants	Shares			Exercise Price		Contractual Life (Years)
Outstanding as of January 1, 2020		43,667		$	3.34		4.72
Issued		1,000,000			3.75		4.73
Outstanding as of December 31, 2020		1,043,667		$	3.73		4.69
Issued		150,418			2.51		4.12
Expired		(2,000	)		10.50		-
Outstanding as of December 31, 2021		1,192,085		$	3.57		3.75
Exercisable as of December 31, 2021		1,041,667		$	3.72		3.70