Note 8 - Stockholders' Equity

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note 8 – Stockholders’ Equity

 Conversion of Subordinated Debt to Equity

On  February 11, 2021, the Company exchanged $625,000 of its outstanding 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 $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 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.

The issuance of warrants 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 nine months ended September 30, 2022 is as follows (in thousands): 

					Weighted Average
			Weighted Average		Remaining
	Shares		Exercise Price		Contractual Life (Years)
Outstanding as of December 31, 2021		1,192,085	$	3.57		3.75
Issued		-		-		-
Expired		-		-		-
Outstanding as of September 30, 2022		1,192,085	$	3.57		3.00
Exercisable as of September 30, 2022		1,192,085	$	3.57		3.00