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Note 13 - Warrant Liability

9 Months Ended

Sep. 30, 2022

Other Liabilities Disclosure [Text Block]

NOTE 13. WARRANT LIABILITY

2019 Domestic Warrants, 2019 Foreign Warrants and 2019 Ladenburg Warrants

As further described in Note 14, “Stockholders’ Equity”, the Company issued the 2019 Domestic Warrants, 2019 Foreign Warrants and 2019 Ladenburg Warrants (each as defined in Note 14) in the third quarter of 2019. The terms of the 2019 Domestic Warrants, 2019 Foreign Warrants and 2019 Ladenburg Warrants all required potential cash-settlement in the event of a specified fundamental transaction. Under ASC 480, Distinguishing Liabilities from Equity, the warrants were classified as liabilities because the Company’s potential obligation to cash-settle the warrants was deemed to be beyond the Company’s control. The fair value of outstanding warrants was determined at each reporting date using a Black-Scholes option pricing model with the changes in fair value recorded in the condensed consolidated statements of operations and comprehensive loss.

Upon issuance in the third quarter of 2019, the fair value of the 2019 Domestic Warrants, 2019 Foreign Warrants and 2019 Ladenburg Warrants was determined to be $3.1 million, $2.0 million and $0.1 million, respectively.

In the third quarter of 2020, as further described in Note 14, “Stockholders’ Equity”, the 2019 Domestic Warrants and 2019 Foreign Warrants were exercised at reduced exercise prices. The warrant liabilities associated with these warrants were adjusted to their fair values as of the date of exercise, with the change in fair values recorded in the condensed consolidated statements of operations and comprehensive loss. The fair values were then transferred to equity. As of the date of exercise, the fair value of the 2019 Domestic Warrants and 2019 Foreign Warrants was determined to be $4.9 million and $4.2 million, respectively, in accordance with the following key assumptions:

	2019 Domestic Warrants			2019 Foreign Warrants
Expected price volatility		178	%		178	%
Expected term (in years)		4.57			4.57
Risk-free interest rate		0.25	%		0.27	%
Dividend yield		0.00	%		0.00	%
Weighted-average fair value of warrant	$	1.18		$	1.54

There were no 2019 Domestic Warrants or 2019 Foreign Warrants outstanding as of September 30, 2022.

In the third quarter of 2020, as further described in Note 14, “Stockholders’ Equity”, the Company amended the 2019 Ladenburg Warrants. The Company’s potential obligation to cash-settle the warrants if a specified fundamental transaction occurred was amended to apply only in situations within the Company’s control. Pursuant to this change, the 2019 Ladenburg Warrants were no longer classified as liabilities. The warrant liability associated with the 2019 Ladenburg Warrants was adjusted to fair value as of the date of the amendment, with the change in fair value recorded in the condensed consolidated statements of operations and comprehensive loss. The fair value was then transferred to equity. The fair value of the 2019 Ladenburg Warrants was determined to be $0.2 million on the date of amendment in accordance with the following key assumptions:

Expected price volatility		186	%
Expected term (in years)		4.05
Risk-free interest rate		0.22	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	1.17

The 2019 Ladenburg Warrants will no longer be adjusted to fair value in reporting periods after the amendment. All 2019 Ladenburg Warrants remained outstanding as of September 30, 2022.

Amended July 2020 Warrants

On September 9, 2022, in connection with the 2022 Warrant Reprice Transaction (See Note 14, “Stockholders’ Equity”), the Company reduced the exercise price of certain July 2020 Warrants exercisable for 4,800,000 shares of common stock to $0.18 per share and amended certain other of their terms. In connection with the 2022 Warrant Reprice Transaction, a total of 2,100,000 shares of common stock underlying the Amended July 2020 Warrants (as defined in Note 14) were exercised immediately after amendment. The remaining Amended July 2020 Warrants exercisable for 2,700,000 shares of common stock are subject to a restriction upon their exercise until the later of (i) March 9, 2023 or (ii) the date that the Reverse Stock Split (as defined in Note 20), which was approved by Company’s stockholders on November 10, 2022, becomes effective (See Note 14, “Stockholder’ Equity” and Note 20 “Subsequent Events”). As a result, under ASC 480, Distinguishing Liabilities from Equity, the unexercised Amended July 2020 Warrants were classified as liabilities on the date of amendment and September 30, 2022. The fair value of the Amended July 2020 Warrants was determined to be $0.3 million on the date of amendment in accordance with the following key assumptions:

Expected price volatility		79.6	%
Expected term (in years)		3.4
Risk-free interest rate		3.58	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	0.10

As of September 30, 2022, the fair value of the Amended July 2020 Warrants was determined to be $0.1 million in accordance with the following key assumptions:

Expected price volatility		79.6	%
Expected term (in years)		3.3
Risk-free interest rate		3.58	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	0.05

November 2021 Warrants

As further described in Note 14, “Stockholders’ Equity”, the Company issued the November 2021 Warrants in the fourth quarter of 2021 which were all subsequently amended pursuant to the 2022 Warrant Reprice Transaction (as defined and further described below in Note 14). The amended terms of the November 2021 Warrants included a restriction upon the exercise of the November 2021 Warrants until the later of (i) March 9, 2023 or (ii) the date that the Reverse Stock Split, which was approved by the Company’s stockholders on November 10, 2022, becomes effective (See Note 14, “Stockholder’ Equity” and Note 20 “Subsequent Events”).

Under ASC 480, Distinguishing Liabilities from Equity, the November 2021 Warrants prior to being amended were classified as liabilities as of December 31, 2021, which classification continued until the November 2021 Warrants became exercisable. The November 2021 Warrants became exercisable subsequent to December 31, 2021, on January 31, 2022 when our stockholders met and approved the necessary increase in authorized share capital available to meet the assumed exercise or conversion of the November 2021 Warrants and the Series B Preferred Stock. On January 31, 2022, as a result of the stockholder approval of the increase in authorized share capital, the November 2021 Warrants became exercisable and were reclassified from a liability to equity because the warrants require physical settlement or net share settlement.

Upon issuance, the fair value of the November 2021 Warrants was determined to be $14.2 million in accordance with the following key assumptions as of November 2, 2021:

Expected price volatility		84.9	%
Expected term (in years)		6.2
Risk-free interest rate		1.29	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	0.38

As of December 31, 2021, the fair value of the November 2021 Warrants was determined to be $9.6 million in accordance with the following key assumptions:

Expected price volatility		87	%
Expected term (in years)		6.0
Risk-free interest rate		1.31	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	0.25

On September 9, 2022, in connection with the 2022 Warrant Reprice Transaction (See Note 14, “Stockholders’ Equity”), the Company reduced the exercise price of all of the November 2021 Warrants to $0.18 per share and amended certain other of their terms. In connection with the 2022 Warrant Reprice Transaction, a total of 9,375,000 shares of common stock underlying the November 2021 Warrants were exercised immediately after amendment. As a result, under ASC 480, Distinguishing Liabilities from Equity, the unexercised November 2021 Warrants, as amended, were classified as liabilities on the date of amendment and September 30, 2022. The fair value of the November 2021 Warrants, as amended, was determined to be $3.5 million on the date of amendment in accordance with the following key assumptions:

Expected price volatility		79.6	%
Expected term (in years)		6.0
Risk-free interest rate		3.43	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	0.13

As of September 30, 2022, the fair value of the November 2021 Warrants, as amended, was determined to be $1.9 million in accordance with the following key assumptions:

Expected price volatility		79.6	%
Expected term (in years)		6.0
Risk-free interest rate		3.43	%
Dividend yield		0.00	%
Weighted-average fair value of warrants	$	0.07

September 2022 Warrants

On September 9, 2022, in connection with the 2022 Warrant Reprice Transaction (See Note 14, “Stockholders’ Equity”), the Company issued the September 2022 Warrants. The September 2022 Warrants are subject to an exercise restriction until the later of (i) March 9, 2023 or (ii) the date that the Reverse Stock Split, which was approved by Company stockholders on November 10, 2022, becomes effective (See Note 14, “Stockholders’ Equity and Note 20 “Subsequent Events”). As a result, under ASC 480, Distinguishing Liabilities from Equity, the September 2022 Warrants were classified as liabilities on the date of issuance and September 30, 2022. The fair value of the September 2022 Warrants was determined to be $1.4 million as of the date of issuance in accordance with the following key assumptions:

Expected price volatility		79.6	%
Expected term (in years)		6.0
Risk-free interest rate		3.43	%
Dividend yield		0.0	%
Weighted-average fair value of warrants	$	0.13

As of September 30, 2022, the fair value of the September 2022 Warrants was determined to be $0.8 million in accordance with the following key assumptions:

Expected price volatility		79.6	%
Expected term (in years)		6.0
Risk-free interest rate		3.43	%
Dividend yield		0.0	%
Weighted-average fair value of warrants	$	0.07