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Stockholders' Equity
 12 Months Ended
Dec. 31, 2021
Stockholders Equity Note [Abstract]  
Stockholders' Equity

Note 7: Stockholders’ Equity

Convertible Preferred Shares

The following tables summarize the movement in preferred shares for the year ended December 31, 2020.

 

Class A

 

 

Class B

 

 

Class C

 

 

 

 

 

(amounts in thousands)

preferred shares

 

 

preferred shares

 

 

preferred shares

 

 

Total

 

Balance at January 1, 2020

 

124

 

 

$

4,457

 

 

 

1,989

 

 

$

54,831

 

 

 

2,959

 

 

$

58,803

 

 

$

118,091

 

Dividends accrued

 

 

 

 

 

65

 

 

 

 

 

 

 

796

 

 

 

 

 

 

 

-

 

 

 

861

 

Amortization of issuance costs and warrants

 

 

 

 

 

-

 

 

 

 

 

 

 

77

 

 

 

 

 

 

 

728

 

 

 

805

 

Foreign exchange impact

 

 

 

 

 

(293

)

 

 

 

 

 

 

(3,601

)

 

 

 

 

 

 

(3,862

)

 

 

(7,756

)

Preferred shares converted into Peraso Shares

 

(124

)

 

 

(4,229

)

 

 

(1,989

)

 

 

(52,103

)

 

 

(2,959

)

 

 

(55,669

)

 

 

(112,001

)

Balance at December 31, 2020

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In March 2020, the Company issued 124,408 Peraso Shares upon conversion of all outstanding Class A preferred shares amounting to $4,229,288 and 1,988,554 Peraso Shares upon conversion of all outstanding Class B preferred shares amounting to $52,102,651.  The Class A and B preferred shares were converted into Peraso Shares based on the original conversion price of CDN$1.00 ($0.72 USD). The outstanding accumulated dividends of $22,732,543 were reclassified into additional paid-in capital.

In March 2020, the Company also issued 2,958,787 Peraso Shares amounting to $55,668,932 upon conversion of all outstanding Class C preferred shares based on the amended conversion price of CDN$1.18 ($0.85 USD). As a conversion inducement, the Company amended the ratio for the conversion of the Class C preferred shares into Peraso Shares from 1:1 to 1:1.25. The Company determined that the additional Peraso Shares issuable arising from such modification totaled 591,757 with a fair value of $11,133,786 and recognized such amount as a deemed dividend.

These convertible preferred shares were accounted for as mezzanine equity prior to their conversion into Peraso Shares in March 2020.

 

Warrants classified as equity

At December 31, 2021, the Company had the following warrants outstanding (share amounts in thousands):

 

Warrant Type

 

Number of Shares

 

 

Exercise Price

 

 

Expiration

Common stock

 

 

33

 

 

$

47.00

 

 

January 2023

Common stock

 

 

101

 

 

$

2.40

 

 

October 2023

 

 

 

Warrants classified as liability

Warrants outstanding at December 31, 2020 and their respective exercise price and expiration dates, were as follows:

 

 

 

 

 

 

 

 

 

Year Issued

 

Number of warrants issued (recast)

 

 

Exercise price

 

Expiration

2014

 

 

27

 

 

CDN$1.00

 

December 31, 2025

2015

 

 

4

 

 

CDN$1.00

 

August 31, 2022

2016

 

 

19

 

 

CDN$1.479

 

December 31, 2025

2017

 

 

7

 

 

CDN$1.479

 

December 31, 2022

2017

 

 

15

 

 

CDN$1.479

 

December 31, 2025

2019

 

 

3

 

 

CDN$1.479

 

December 31, 2025

2020

 

 

98

 

 

CDN$0.15

 

December 31, 2025

2020

 

 

202

 

 

CDN$0.15

 

December 31, 2023

Total

 

 

375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise prices in USD were $0.79, $1.16, and $0.12 at December 31, 2020.

 

Warrant activity and the related changes in the estimated fair values during the years ended December 31, 2021 and 2020 were:

 

 

 

Number of shares (recast)

 

 

Amount

 

Balance -  December 31, 2019

 

 

75

 

 

$

1,501,307

 

Issued in the year

 

 

300

 

 

 

5,300,798

 

Change in fair value of warrants

 

 

—

 

 

 

(96,267

)

Balance -  December 31, 2020

 

 

375

 

 

 

6,705,838

 

Issued in the year

 

 

133

 

 

 

2,604,420

 

Effect of business combination

 

 

(508

)

 

 

(1,208,250

)

Change in fair value of warrants

 

 

—

 

 

 

(8,102,008

)

Balance -  December 31, 2021

 

 

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

The fair value of the warrant liability was estimated using the Black-Scholes option-pricing model. Peraso Tech was a private company and lacked company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the semiconductor industry with characteristics similar to the Company. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero, based on the fact that the Company had never paid cash dividends and did not expect to pay any cash dividends in the foreseeable future.

 

The Company granted warrants with exercise price of CDN$0.15 ($0.12 USD) to purchase 6,628,495 common shares of the Company in 2020 to certain holders of convertible debentures (Note 7). The total fair values of these warrants at grant date amounted to $5.3 million in 2020. The fair values were determined using Black-Scholes model with the following assumptions: expected term based on the contractual term of 3.2 - 5 years, risk-free interest rate of 0.37%-0.38% based on a comparable US Treasury Bond, expected volatility of 104.37%, and expected dividend of zero.

 

The fair values of the outstanding warrants at December 31, 2020 was calculated based on the following assumptions used in the Black-Scholes model: expected term based on the remaining contractual term of 1.92-5.25 years, risk-free interest rate of 0.36% based on a comparable US Treasury Bond, expected volatility of 104.37%, and expected dividend of zero.

In accordance with the Arrangement Agreement, on December 16, 2021, the warrants were settled in exchange for a defined number of common shares. Upon settlement, the fair value of the warrants were calculated using the intrinsic fair value of the common shares.  The change in fair value was recognized in other income (expense) in the consolidated statements of operations.