Stockholders' Deficit and Warrants

6 Months Ended

Jun. 30, 2021

Equity [Abstract]

Stockholders' Deficit and Warrants

Note 7 - Stockholders’ Deficit and Warrants

Sale of Common Stock

On February 27, 2020, the Company sold a total of 1,260,000 shares of its common stock to Danny Cuzick (“Cuzick”) and R. Scott Wheeler (“Wheeler”) for aggregate gross proceeds of $3.2 million pursuant to the terms of a subscription agreement. The Company did not pay any underwriter discounts or commissions in connection with the sale of the shares. The shares of common stock sold have the right to convert into securities which bear the same terms as those offered to satisfy the Liquidity Milestone defined in the Incremental Amendment (such securities being the Series B Preferred Stock discussed below).

Common Stock Subscribed

During the fourth quarter of 2019, the Company agreed to issue 8,664 shares of common stock to settle a note payable and the associated accrued interest. The Company issued these shares during the first quarter of 2020.

Redemption of Common Stock and Issuance of Series B Preferred Stock

On March 24, 2020, in accordance with the terms of the common stock subscription agreement, the Company entered into a stock redemption agreement with each of Cuzick and Wheeler, pursuant to which (i) the Company redeemed 1,200,000 and 60,000 shares of its common stock held by Cuzick and Wheeler, respectively, and (ii) agreed to issue 1,000,000 and 50,000 shares of its Series B Preferred Stock to Cuzick and Wheeler, respectively. The Company accounted for this exchange as a $3.2 million increase in Series B Preferred Stock and a $3.2 million decrease in common stock and additional paid-in capital.

In addition, on March 24, 2020, the Company sold a total of 1,000,000 shares of its Series B Preferred Stock to Cuzick for aggregate gross proceeds of $3.0 million pursuant to the terms of a subscription agreement. On March 27, 2020, in a separate agreement, the Company and Cuzick entered into a waiver and warrant agreement pursuant to which Cuzick waived certain rights granted via the subscription agreement in exchange for the Company agreeing to issue to Cuzick warrants to purchase up to 3,250,000 shares of Common Stock at an exercise price of $2.50 per share. The Company accounted for the issuance of warrants at their estimated fair value as a dividend via a $0.5 million reduction of additional paid-in capital.

Warrants

As further described in Note 6, Debt, the Company issued the following warrants in connection with the Financing Agreement:

•In September 2019, the Company issued warrants to purchase an aggregate of 4,375,000 shares of the Company’s common stock to the lenders. The Company also issued the Side Letter Warrant to the lenders to purchase an additional 1,500,000 shares of the Company’s common stock. The total fair value of these warrants of $7.4 million, which the Company recorded as an additional debt discount, will be amortized to interest expense over the remaining term of the Financing Agreement.

•In September 2019, as consideration for the subordination of previously issued promissory notes, the Company issued a warrant to the noteholder to purchase an aggregate of 350,000 shares of the Company’s common stock at an exercise price of $0.01 per share. The total fair value of this warrant of $0.5 million, which the Company recorded as an additional debt discount on the promissory notes, will be amortized to interest expense over the remaining term of the promissory notes.

•In February 2020, as a result of the Incremental Amendment, the Company issued the Antara Warrant 2020 to Antara Capital to purchase 3,650,000 shares of the Company’s common stock at an exercise price of $2.50 per share.

•In March 2020, as a result of the Waiver Agreement, the Company issued to Antara Capital a warrant to purchase up to 3,250,000 shares of the Company’s common Stock at an exercise price of $2.50 per share.

•In October 2020, as a result of the Omnibus Amendment, the Company issued to the lenders warrants to purchase an aggregate of up to 500,000 shares of the voting common stock of the Company at the price of $0.01 per share.

•In October 2020, as a result of the Omnibus Amendment, the Company exchanged, without any cash consideration, all warrants previously issued to the lenders for warrants to purchase for $0.01 per share voting common stock of the Company at the rate of 0.64 warrants for shares of voting common stock of the Company. As a result, warrants to purchase an aggregate of 7,925,000 shares of the Company’s common stock at a price of $2.50 per share were exchanged for an aggregate of 5,072,000 shares of the Company’s common stock at a price of $0.01 per share.

•In December 2020, as a result of failing to timely repay certain obligations under the Financing Agreement with the net proceeds (in the amount of at least $25.0 million) of a financing under the "Main Street Lending Program” on or before December 31, 2020, the Company issued to the lenders warrants to purchase an aggregate of up to 1,000,000 shares of the voting common stock of the Company at the price of $0.01 per share. The Company recorded the $0.8 million estimated fair value of the warrants as an increase to interest expense in the fourth quarter of 2020.

As further described in Note 6, Debt, in connection with the December 2020 Main Street Loan, the Company contributed 100% of the issued and outstanding equity of EAF to EVO Holding with the consent of Danny Cuzick as the holder of certain previously disclosed promissory notes that are secured in part by the assets of EAF. In consideration of Danny Cuzick’s consent to the contribution, the Company issued to him the Cuzick Warrant to purchase up to 1,000,000 shares of common stock of the Company at the cost of $0.01 per share. Danny Cuzick is a member of the Company’s Board. The Company did not pay any underwriter discounts or commissions in connection with the issuance of the Cuzick Warrant.

All of the aforementioned warrants are not considered indexed to the Company's common stock and, therefore, are required to be classified as liabilities and measured at fair value at each reporting date with the change in fair value being recognized in the Company's results of operations during each reporting period. The following table summarizes such warrants outstanding and exercisable as of June 30, 2021 and December 31, 2020 that are liability-classified.

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
June 30, 2021
Outstanding		16,022,000	$	0.52		5.3
Exercisable		16,022,000	$	0.52
December 31, 2020
Outstanding		16,022,000	$	0.52		5.8
Exercisable		16,022,000	$	0.52

In addition to the issuance of the aforementioned liability-classified warrants, the Company has issued warrants with different terms that are considered indexed to the Company's common stock and, therefore, are classified in additional paid-in capital and are not required to be measured at fair value at each reporting date. The following table summarizes such equity-classified warrants outstanding and exercisable as of June 30, 2021 and December 31, 2020.

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
June 30, 2021
Outstanding		11,087,708	$	2.44		7.4
Exercisable		11,087,708	$	2.44
December 31, 2020
Outstanding		8,856,255	$	2.91		7.4
Exercisable		8,522,922	$	2.91