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Stockholders' Equity
 12 Months Ended
Dec. 31, 2022
Stockholders' Equity [Abstract]  
Stockholders’ Equity

Note 10. Stockholders’ Equity

 

Securities Purchase Agreement

 

On November 30, 2022, the Company entered into a securities purchase agreement (the SPA) with an institutional investor, pursuant to which the Company sold to the investor, in a registered direct offering, an aggregate of 1,300,000 shares of common stock at a negotiated purchase price of $1.00 per share. The Company also offered and sold to the investor pre-funded warrants to purchase up to 1,150,000 shares of common stock. Each pre-funded warrant is exercisable for one share of common stock. The purchase price of each pre-funded warrant was $0.99, and the exercise price of each pre-funded warrant is $0.01 per share. The pre-funded warrants were immediately exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in full. Net proceeds to the Company, after offering costs, were $2.1 million.

 

In a concurrent private placement, the Company also sold to the investor a warrant to purchase up to 3,675,000 shares of common stock (the Purchase Warrant). The Purchase Warrant will be exercisable beginning six months and one day from the date of the SPA at an exercise price of $1.36 per share and will expire on the five-year anniversary of that date.

 

Warrants Classified as Liability

 

Purchase Warrant

 

The SPA governing the Purchase Warrant provides for a value calculation for the Purchase Warrant using the Black Scholes model in the event of certain fundamental transactions. The fair value calculation provides for a floor on the volatility amount utilized in the value calculation at 100% or greater. The Company has determined this provision introduces leverage to the holders of the Purchase Warrant that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares. Therefore, pursuant to ASC 815, the Company has classified the Purchase Warrant as a liability in its consolidated balance sheet. The classification of the Purchase Warrant, including whether the Purchase Warrant should be recorded as liability or as equity, is evaluated at the end of each reporting period with changes in the fair value reported in other income (expense) in the consolidated statements of operations and comprehensive loss. The Purchase Warrant was initially recorded at a fair value at $3.7 million at the grant date and is re-valued at each reporting date. As of December 31, 2022, the fair value of the warrant liability was reduced to $2.1 million. Upon the closing of the registered direct offering, the fair value of the Purchase Warrant liability, up to the net amounts of the funds received of approximately $2,099,000, was recorded as a financing cost, and the excess of $1,576,000 was recorded as a financing cost in the statement of operations. As a result of the change in fair value the Company recorded a gain for the year ended December 31, 2022

 

The fair value of the Purchase Warrant at December 31, 2022 was determined using Black Scholes model with the following assumptions: expected term based on the contractual term of 5.4 years, risk-free interest rate of 4.00%, which was based on a comparable US Treasury 5-year bond, expected volatility of 114%, and an expected dividend of zero.

 

As of December 31, 2022, the Company had the following liability-classified warrants outstanding (share amounts in thousands):

 

   Number of
warrants on		     
   common
shares		   Amount 
Balance as of December 31, 2021   
—
   $
—
 
Recognition of warrant liabilities   3,675    3,674 
Change in fair value of warrants   
—
    (1,595)
Balance as of December 31, 2022   3,675   $2,079 

 

Peraso Tech Warrants

 

As of January 1, 2021, the Company had warrants outstanding to purchase 375,000 shares of its common stock. During the year ended December 31, 2021, the Company issued warrants to purchase an additional 133,000 shares of its common stock. In accordance with the Arrangement Agreement, on December 16, 2021, the warrants to purchase the 508,000 shares of common stock were settled in exchange for a defined number of common shares. Upon settlement, the fair value of the warrants was calculated using the intrinsic fair value of the common shares. The change in fair value of approximately $8.1 million was recognized in other income (expense) in the consolidated statements of operations.

 

Warrants Classified as Equity

 

As of December 31, 2022, the Company had the following equity-classified 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
Common stock   1,150   $0.01   —

 

As of December 31, 2021, the Company had the following equity-classified 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