Note 10 - Preferred Stock and Common Stock Warrants

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

PreferredStockAndWarrants [Text Block]

Note 10 – Preferred Stock and Common Stock Warrants

Preferred Stock

As of December 31, 2022, the Company had outstanding 82,948 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), 79,239 shares of Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”) and 59,366 shares of Series C Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock” and, together with the Series A Preferred Stock and the Series B Preferred Stock, the “Convertible Preferred Stock”).

The shares of Convertible Preferred Stock bear dividends at a rate of 12% per annum, which are cumulative and accrue daily from the respective dates of issuance on the $1,000 stated value per share. Such dividends are payable quarterly and may be paid in cash or in-kind. During the nine months ended September 30, 2023 and 2022, the Company paid-in-kind $20.5 million and $17.7 million of dividends, respectively, to the holders of the Convertible Preferred Stock.  On July 13, 2023, the Company declared dividends to the holders of the Convertible Preferred Stock as of the close of business on June 15, 2023.  On July 17, 2023, the Company paid-in-kind $7.0 million of dividends to the holders of the Convertible Preferred Stock.

On July 26, 2023, the Convertible Preferred Stock was converted into 59,542,066 shares of common stock.

Common Stock Warrants

The Company issued warrants exercisable to purchase Company common stock in connection with its issuances of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (collectively, the “Common Stock Warrants”).  The Company revalues the Common Stock Warrants at each balance sheet date and recognized a gain of $3.3 million and a loss of $2.8 million during the three months ended September 30, 2023 and 2022, respectively, and losses of $2.5 million and $7.2 million for the nine months ended September 30, 2023 and 2022, respectively. The Common Stock Warrant liabilities are included in Level 3 of the fair value hierarchy.

The assumptions used in the Monte Carlo simulation model to estimate the fair value of the Common Stock Warrants are as follows:

	September 30,			December 31,
	2023			2022
Stock price	$	5.12		$	4.94
Exercise price	$	0.01		$	0.01
Risk-free rate		5.3	%		4.6	%
Volatility		81.9	%		52.5	%
Term (years)		0.7			1.5