| Changes in Capital Accounts |
9. Changes in Capital Accounts
(a) Company’s Preferred Stock: As of June 30, 2023 and December 31, 2022, the Company’s authorized preferred stock consists of 25,000,000 shares of preferred stock, par value $0.01 per share. Of these preferred shares, 1,250,000 have been
designated Series A preferred shares, 1,200,000 have been designated Series B preferred shares, and 1,587,314 have been designated as Series C Preferred Shares (see paragraph (b) below). As of June 30, 2023, 50,726
Series B preferred shares and 1,485,862 Series C preferred shares were issued and outstanding. As of December 31, 2022, 136,261
Series B preferred shares and 1,314,792 Series C preferred shares were issued and outstanding.
(b) Tender Offer to Exchange Common Shares for Shares of Series B
Convertible Cumulative Perpetual Preferred Stock, and Issuance of Shares of Series C Convertible Cumulative Perpetual Preferred Stock: In December 2021, the Company commenced an offer to exchange up to 271,078
of its then issued and outstanding common shares, par value $0.01 per share, for newly issued shares of the Company’s Series B
Convertible Cumulative Perpetual Preferred Stock (“Series B Preferred Shares”), par value $0.01, at a ratio of 4.20 Series B Preferred Shares for each common Share.
The material terms of the Series B Preferred Shares are as follows: 1)
Dividends: The Company pays a 4.00% annual
dividend on the Series B Preferred Shares, on a quarterly basis, either in cash, or, at the Company’s option, through the issuance of additional common shares, valued at the volume-weighted average price of the common stock for the 10 trading days prior to the dividend payment date; 2) Voting Rights: Each Series B Preferred
Share has no voting rights; 3) Conversion Rights: Each Series B Preferred Share was convertible at the option of the holder during the applicable conversion period which expired on March 15, 2023 for additional cash consideration of $7.50 per converted Series B Preferred Share, into two Series C Preferred Shares (see description below); 4) Liquidation: Each Series B Preferred Share has a fixed liquidation preference of $25.00 per
share; 5) Redemption: The Series B Preferred Shares are not subject to mandatory redemption or
to any sinking fund requirements, and will be redeemable at the Company’s option, at any time, on or after the date that is the date immediately following the 15-month anniversary of the issuance date, at $25.00 per share plus accumulated and unpaid
dividends thereon to and including the date of redemption. Also, upon the occurrence of a liquidation event, holders of Series B Preferred Shares shall be entitled to receive out liquidating distribution or payment in full redemption of
such Series B Preferred Shares in an amount equal to $25.00, plus the amount of any accumulated and unpaid dividends thereon; 6) Rank: Finally, the Series B Preferred Shares rank senior to common shares with respect to dividend distributions and
distributions upon any liquidation, winding up or dissolution of the Company.
The tender offer expired on January 27, 2022, and a total of 188,974 common shares were validly
tendered and accepted for exchange, which resulted in the issuance of 793,657 Series B Preferred Shares (with aggregate
liquidation preference of $19,841), out of which 657,396 were acquired by Aliki Paliou through Mango (Note 4), and 28,171 were acquired by Andreas Michalopoulos.
For the six months ended June 30, 2023 and 2022,
declared and paid dividends on Series B preferred shares amounted to $29 (or $0.50 per each Series B preferred share) and $nil respectively. As of June 30, 2023 and 2022
accrued and not paid dividends on Series B preferred shares amounted to $2 and $328 respectively.
On October 17, 2022, the Company entered into a stock purchase agreement with Mango, pursuant to which it agreed to issue to Mango in a private placement 1,314,792 shares (with aggregate liquidation preference of $32,870)
of its newly-designated Series C Convertible Cumulative Redeemable Perpetual Preferred Stock (“Series C Preferred Shares”) in exchange for (i) all 657,396
Series B Preferred Shares held by Mango and (ii) the agreement by Mango to apply $4,930 (an amount equal to the aggregate cash
conversion price payable upon conversion of such Series B Preferred Shares into Series C Preferred Shares pursuant to their terms) as a prepayment by the Company of the unsecured credit facility agreement dated March 2, 2022 (Note 4) and made between the Company as borrower and Mango as lender, maturing in March 2023 and bearing interest at 9.0% per annum. The Company repaid
on October 19, 2022 the remaining amount due to the credit facility of $70,
and any remaining accrued interest, and terminated the loan agreement with Mango. The transaction was approved by a special independent committee of the Company’s Board of Directors. The authorized number of Series C Preferred Shares, par
value $0.01 and $25.00
liquidation preference, is 1,587,314, out of which 1,314,792 shares were issued to Mango.
The remaining Series C Preferred Shares could be issued
not earlier than one year from the date of original issuance of the Series B Preferred Shares. In this respect, on February 13, 2023, the Company notified its Series B preferred stockholders, that pursuant to the effective registration statement on Form F-3 filed by the Company with the U.S. Securities and Exchange Commission on January 27, 2023, the holders of the Company’s
issued and outstanding Series B Preferred Shares may at any time through and including March 15, 2023, convert, at the option of the holder, one Series B Preferred Share, for additional cash consideration of $7.50 per converted Series B Preferred Share, into two shares of Series C Convertible Cumulative
Perpetual Preferred Stock. Upon the closing of the conversion period on March 15, 2023, 85,535 Series B preferred shares have been
converted to 171,070 Series C preferred shares, and the net proceeds received, after deducting commissions and other expenses,
amounted to $482.
The material
terms of the Series C Preferred Shares are as follows: 1) Dividends: Dividends on
each Series C Preferred Share shall be cumulative and shall accrue at a rate equal to 5.00% per annum of the Series C
liquidation preference per Series C Preferred Share from the dividend payment date immediately preceding issuance, and can be paid either in cash, or, at the Company’s option, through the issuance of additional common shares; 2) Voting Rights: Each holder of Series C Preferred Shares is entitled, from the date of issuance of the Series C Preferred Shares, to a number of
votes equal to the number of Common Shares into which such holder’s Series C Preferred Shares would then be convertible (notwithstanding the requirement that the Series C Preferred Shares are convertible only after six months following the Original Issuance Date), multiplied by 10.
The holders of Series C Preferred Shares shall vote together as one class with the holders of Common Shares on all matters
submitted to a vote of the Company’s shareholders (with certain exceptions); 3) Conversion Rights: The Series C Preferred Shares
are convertible into common shares (i) at the option of the holder: in whole or in part, at any time on or after the date that is the date immediately following the six-month anniversary of the Original Issuance Date at a rate equal to the Series C liquidation preference, plus the amount of any accrued and unpaid dividends thereon
to and including the date of conversion, divided by an initial conversion price of $0.50, subject to adjustment from time to
time, or (ii) mandatorily: on any date within the Series C Conversion Period, being any time on or after the date that is the date immediately following the six-month anniversary of October 17, 2022 (or “the Original Issuance Date”), on which less than 25% of the authorized number of Series C Preferred Shares are outstanding and the volume-weighted average price of the common shares for the 10 trading days preceding such date exceeds 130% of the conversion
price in effect on such date, the Company may elect that all, or a portion of the outstanding Series C Preferred Shares shall mandatorily convert into common shares at a rate equal to the Series C liquidation preference, plus the amount of
any accrued and unpaid dividends thereon to and including such date, divided by the conversion price. The conversion price is subject to adjustment for any stock splits, reverse stock splits or stock dividends, and shall also be adjusted
to the lowest price of issuance of common stock by the Company for any registered offering following the Original Issuance Date, provided that such adjusted conversion price shall not be less than $0.50 (this conversion price adjustment clause is further analyzed later); 4) Liquidation: Each Series C Preferred Share has a fixed liquidation preference of $25.00 per share; 5) Redemption: The Series C Preferred Shares are not subject to mandatory redemption, and will be redeemable at the Company’s option, at any time,
on or after the date that is the date immediately following the 15-month anniversary of the issuance date, in whole or in part,
at $25.00 per share plus accumulated and unpaid dividends thereon to and including the date of redemption. The Company shall
effect any such redemption by paying a) cash or, b) at the Company’s election, and provided on the date of the redemption notice less than 25%
of the authorized number of Series C are outstanding, shares of common stock valued at the volume-weighted average price of common stock for the last 10 trading days prior to the redemption date. Also, upon the occurrence of a liquidation event, holders of Series C Preferred Shares shall be entitled to receive out liquidating distribution or payment in
full redemption of such Series C Preferred Shares in an amount equal to $25.00, plus the amount of any accumulated and unpaid
dividends thereon; 6) Rank: The Series C Preferred Shares rank senior to common shares, and on a parity with the Series B Preferred Stock,
with respect to dividend distributions and distributions upon any liquidation.
For the six months ended June 30, 2023 and 2022, declared and paid
dividends on the Series C preferred shares amounted to $922 (or $0.625 per each Series C preferred share), out of which $822 and $nil were paid to Mango, respectively. On June 30, 2023 and 2022,
accrued and not paid dividends on the Series C preferred shares, amounted to $87 and $nil, respectively (Note 4).
The Company, when assessing the accounting of the Series B preferred stock, has taken into consideration the provisions of ASC 480 “Distinguishing
Liabilities from Equity” and ASC 815 “Derivatives and Hedging” and determined that the Series B preferred shares should be classified as permanent equity rather
than temporary equity or liability. The preferred stock was measured as of the date of closing of the tender offer, being January 27, 2022, at fair value on a
non-recurring basis. Its fair value was determined through Level 3 inputs of the fair value hierarchy as determined by management and amounted to $18,030. The fair value of the preferred stock weighted the probabilities: a) that the Series B are not further exchanged for Preferred C shares,
and b) that the Series B are converted to Series C on the applicable conversion date. The fair value of the conversion option embedded in the Series C Preferred Shares was estimated using the Black & Scholes model. Moreover, the
Company’s valuation used the following assumptions: (a) stated dividend yields for the Series B preferred stock and Series C preferred stock, (b) cost of equity of 11.07%, based on the CAPM theory; (c) expected volatility of 77%,
(d) risk free rate of 1.66% determined by management using the applicable 5-year treasury yield as of the measurement date, (e) market value of common stock of $3.09 (which was the current market price as of the date of the fair value measurement) and (f) expected life of convertibility option of the Series C preferred shares to common shares of 4 years. The Company applied option moneyness scenarios and determined the aforementioned assumptions of volatility and expected life of the
convertibility option. The Company’s valuation determined that the exchange resulted in an excess value of the Series B preferred shares of $9,271,
or $11.68 per preferred share, as compared to the fair value of the common shares exchanged, that was transferred from the common
holders to the preferred holders on the measurement date, and that that value represented a deemed dividend to the preferred holders that should be deducted from the net income to arrive to the net income available to common stockholders
(Note 10). The fair value of the common shares exchanged on the measurement date of $8,759 was determined through Level 1 inputs of the fair value hierarchy (quoted market price on the date of the exchange).
Accordingly, in its assessment for the accounting of the Series C
preferred stock, the Company has taken into consideration the provisions of ASC 480 “Distinguishing Liabilities from Equity” and ASC 815 “Derivatives and Hedging” and determined that the Series C preferred shares should be classified as permanent equity rather than temporary equity or liability. The Series C
preferred stock was measured as of the date of their issuance, being October 17, 2022, at fair value on a non-recurring basis. Its fair value was determined
through Level 3 inputs of the fair value hierarchy as determined by management and amounted to $26,809. The fair value of the preferred stock was estimated as the sum of two components:
a) the “straight” preferred stock component, using the discounted cash flow model, and b) the embedded option component, using the Black & Scholes model. For this assessment, the Company’s valuation used the following assumptions: (a)
stated dividend yield for the Series C preferred stock, (b) cost of equity of 10.38%, based on the CAPM theory; (c) expected
volatility of 89%, (d) risk free rate of 4.23% determined by management using the applicable 5-year treasury yield as of the
measurement date, (e) market value of common stock of $0.31 (which was the current market price as of the date of the fair value
measurement), and (f) expected life of convertibility option of the Series C preferred shares to common shares of 4 years. The
Company applied option moneyness scenarios and determined the aforementioned assumptions of volatility and expected life of the convertibility option. The Company’s valuation determined that the transaction resulted in an excess value of
the Series C preferred shares of $6,944, or $5.28 per preferred share, as compared to the sum of the amount of $4,930 (being the carrying
value of the amount applied by the Company as a prepayment to the loan facility with Mango) and the carrying value of the Series B preferred shares exchanged, that was transferred from the preferred Series B holders to the preferred Series
C holders on the measurement date, and that that value represented a deemed dividend to the preferred Series C holders that should be deducted from the net income to arrive to the net income available to common stockholders. The carrying
value of the Series B preferred shares exchanged by Mango on the measurement date was $14,935.
As discussed above, the conversion price
adjustment clause of the Series C Preferred Shares provides for a reduction in the initial conversion price in case, subsequent to the issuance of the Series C preferred shares, any of the following, among others, happens: a)
upon stock dividend, split, or reverse stock split, or b) in case the Company issues equity securities at prices below the conversion price of the Series C preferred shares then in effect. The Company concluded that the feature mentioned
in b) above provides protection to investors in promising to give each Series C holder investor the lowest pricing available to any other investors, rather than protecting against true economic dilution, and accordingly, this feature
constitutes a down round feature. During 2022, the conversion price has been adjusted from $0.50 to $7.50, after the reverse stock split on November 15, 2022 and was further adjusted to $3.51 following the triggering of the down round feature in December 2022
because of the issuance of common shares through the ATM offering (as discussed below). From January 11, 2023, to January 26, 2023, because of the issuance of common shares through the ATM offering (as discussed below), the conversion price was seven times adjusted, and was gradually reduced to $2.60, and finally, on March 1, 2023, due to the registered direct offering (discussed below) the conversion price was further reduced to $1.36. To measure the effect of the down-round feature the Company performed fair value measurements as determined through Level 3 inputs of the fair value hierarchy by applying the same methodology as per initial fair value measurement for Series C preferred stock. For this assessment the Company updated
the Level 3 inputs as follows: (a) expected volatility in a range of 86.83% to 118.14% for the valuation of the instrument on the triggering dates, and (b)
expected life of convertibility option of the Series C preferred shares to common shares from 1 to 5 years. The Company applied option moneyness scenarios and
determined the aforementioned assumptions of volatility and expected life of the convertibility option. In this respect, the Company determined an aggregate measurement of the down round feature of $9,809, which was accounted for as a deemed dividend that should be deducted from the net income to arrive to the net income available to
common stockholders (Note 10).
(c) Compensation Cost on
Stock Option Awards: On January 1, 2021, the Company granted to its Chief
Financial Officer stock options to purchase 8,000 of the Company’s common shares as share-based remuneration. The stock
options, which were granted pursuant to, and in accordance with, the Company’s Equity Incentive Plan, have been approved by the Company’s board of directors, and have a term of five years. The exercise prices of the options are as follows: 2,000
shares for an exercise price of $150.00 per share, 1,667 shares for an exercise price of $187.50 per share, 1,333 shares for an exercise price of $225.00
per share, 1,000 shares for an exercise price of $300.00 per share, 1,000 shares for an exercise price of $375.00 per share, and 1,000
shares for an exercise price of $450.00 per share. Until June 30, 2023, 8,000 options were outstanding.
(d) Compensation Cost on Restricted Common Stock: On December 30, 2020, the Company’s Board of Directors approved an
amendment to the 2015 Equity Incentive Plan (or the “Plan”), to increase the aggregate number of shares issuable under the plan to 35,922 shares, and further approved 4,481
restricted common shares to be issued on the same date as an award to the Company’s directors. The fair value of the award was $320
and was calculated by using the share closing price of December 29, 2020. One fourth of the shares vested on December 30, 2020, and the remainder three fourths vest ratably over three years
from the issuance date. As at June 30, 2023, 31,441 restricted common shares remained reserved for issuance under the Plan.
Following the resignation of four of the Company’s board members on February 28, 2022, the Company decided to accelerate the
vesting of any unvested shares on the date of their resignation as a severance benefit and the Company recognized the corresponding compensation cost during the first
quarter of 2022. During the six months ended June 30, 2023 and 2022, the aggregate compensation cost on restricted stock amounted to $26 and $80 respectively, and is included in General and
administrative expenses in the accompanying unaudited interim consolidated statements of operations. As at June 30, 2023 and December 31, 2022, the total unrecognized compensation cost relating to restricted share awards was $26
and $52, respectively.
During the six months
ended June 30, 2023 and 2022, the movement of the restricted stock cost was as follows:
| |
|
Number
of Shares
|
|
|
Weighted
Average Grant
Date Price
|
|
|
Outstanding at December 31, 2021
|
|
|
2,240
|
|
|
$
|
71.40
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Vested
|
|
|
(1,540
|
)
|
|
|
71.40
|
|
|
Forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding at June 30, 2022
|
|
|
700
|
|
|
$
|
71.40
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Vested
|
|
|
(350
|
)
|
|
|
71.40
|
|
|
Forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding at December 31, 2022
|
|
|
350
|
|
|
|
71.40
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding at June 30, 2023
|
|
|
350
|
|
|
$
|
71.40
|
|
As at June 30, 2023, the
weighted-average period over which the total compensation cost related to non-vested restricted stock, as presented above, is expected to be recognized, is 0.50 years.
(e) At The Market (“ATM”) Offering: On March 5, 2021, the Company entered
into an At The Market (or “ATM”) Offering Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, pursuant to which the Company could offer and sell, from time to time, up to an aggregate of $5,900 of its common shares, par value $0.01
per share. During the six months ended June 30, 2022, a total of 35,128 common shares were issued as part of the Company’s ATM offering, and the net proceeds received, after deducting underwriting commissions
and other expenses, amounted to $1,338. The Company terminated the specific ATM agreement effective August 23, 2022.
Furthermore, on
December 9, 2022, the Company entered into an At The Market (or “ATM”) Offering Agreement with Virtu Americas LLC (“Virtu”), as sales agent, pursuant to which the
Company could offer and sell, from time to time, up to an aggregate of $30,000 of its common shares, par value $0.01 per share. During 2022, a total of 140,379 common shares were issued as part of the Company’s ATM offering with Virtu, and the net proceeds received, after deducting underwriting
commissions and other expenses, amounted to $450. From January 1, 2023
and up to February 27, 2023, when the Company terminated its ATM agreement with Virtu, a total of 224,817 shares of the Company’s common stock were issued as part of the Company’s ATM offering, and the net proceeds received, after deducting underwriting commissions
and other expenses, amounted to $673.
(f) Equity Offerings of 2022: On June 1, 2022, the Company completed its underwritten public offering of 508,000 units at a price of $15.75
per unit. Each unit consists of one common share (or pre-funded warrant in lieu thereof) and one Class A warrant (the “June 2022 Warrants”) to purchase one common share and was immediately separated upon issuance. Each Class A warrant was immediately exercisable for one common share at an exercise price of $15.75
per share and has a maturity of five years from issuance and can be either physically settled or through the means of a
cashless exercise. The Company may at any time during the term of its warrants reduce the then current exercise price of each warrant to any amount and for any period of time deemed appropriate by the board of directors of the Company,
subject to terms disclosed in each warrants’ agreements. The warrants also contain a cashless exercise provision, whereby if at the time of exercise, there is no
effective registration statement, then the warrants can be exercised by means of a cashless exercise as disclosed in each warrants’ agreements. The Class A warrants and the pre-funded warrants do not have any voting, dividend or
participation rights, nor do they have any liquidation preferences. The Company had granted the underwriters a 45-day option
to purchase up to an additional 76,200 common shares and/or prefunded warrants and / or 76,200 Class A warrants, at the public offering price, less underwriting discounts and commissions. The offering closed on June 1, 2022, and the Company received net proceeds, after underwriting discounts and commissions and expenses, of $7,126 including the partial exercise of the over-allotment option by the underwriters of 59,366 Class A Warrants to purchase up to 59,366
common shares at $0.01 per share.
Furthermore, on July
18, 2022, the Company completed a direct offering of 1,133,333 common shares and warrants to purchase up
to 1,133,333 common shares (the “July 2022
Warrants”) at a concurrent private placement. The combined effective purchase price for one common share and one warrant to purchase one
common share was $5.25. Each warrant is immediately exercisable for one common share at an initial exercise price of $5.25
per share, and will expire in five and a half years from issuance. The offering closed on July 19, 2022, and the Company received net proceeds, after underwriting discounts and commissions and expenses, of approximately $5,271.
The July 2022 Warrants have similar terms to the June Warrants, with the only significant difference being the existence of an exercise price adjustment clause (discussed below), which was assessed by the Company as a down round
feature. Following to the registered direct offering of August 12, 2022 (discussed below) the July 2022
Warrants’ exercise price has been reduced to $4.75, and following the share issuances through the Company’s ATM offering in December 2022 (discussed in (f) above), the July 2022 Warrants’ exercise price has been reduced to $3.51 according to the terms of
the Form of Warrant. Furthermore, from January 11, 2023, to January 26, 2023, the July 2022 Warrant’s exercise price was seven times adjusted because of the issuance of common shares
through the ATM offering (discussed in (f) above), and was gradually reduced to $2.60, while on March 1, 2023, due to the registered direct offering (discussed in (g) below) their exercise price was further reduced to their floor price of $1.65.
Finally, on August
12, 2022, the Company entered into a securities purchase agreement with certain unaffiliated institutional investors to purchase 2,222,222 of its common shares and warrants to purchase 2,222,222 common shares (the “August 2022 Warrants”) at a price of $6.75 per common share and
accompanying warrant in a registered direct offering. The August Warrants are immediately exercisable, expire five years from the date of issuance, and had an initial exercise price of $6.75
per common share. The offering closed on August 16, 2022, and the Company received net proceeds, after deducting underwriting discounts and commissions and
expenses, of approximately $13,707.
The August
2022 Warrants have similar terms to the July 2022 Warrants, including the exercise price adjustment clause that constitutes a down-round
feature. Further to the share issuances through the Company’s ATM offering in December 2022 (discussed previously), the August 2022 Warrants’ exercise price has been reduced to $3.51, according to the terms of
the Form of Warrant. Furthermore, from January 11, 2023, to January 26, 2023, the August 2022 Warrant’s exercise price was seven times adjusted because of the issuance of common shares
through the ATM offering, and was gradually reduced to $2.60, while on March
1, 2023, due to the registered direct offering (discussed below) their exercise price was further reduced to their floor price of $1.65.
The exercise price adjustment clause of the July 2022 and August 2022 Warrants provides for a reduction in the warrants’ initial exercise price in
case the company, subsequent to the warrants issuance: a) issues equity securities at prices below the initial exercise price of the July 2022 and August 2022 Warrants, or b) the Company’s stock trades below the July 2022 and August 2022 Warrants’ exercise price during any of the five trading
sessions following the issuance of such equity securities. The Company concluded that the specific feature provides protection to investors in promising to give each warrant holder investor the lowest pricing available to any other
investors, rather than protecting against true economic dilution, and accordingly, this feature constitutes a down round feature. Following the Company’s registered offering in August
2022, the down round feature of the July 2022 Warrants was triggered. Consequently, the Company measured the value of the effect of the
feature as of the August 18, 2022, being the date that the down round feature was triggered and determined an approximate measurement of the down round feature of
$22, which was accounted for as a deemed dividend. Moreover, following the ATM offering with Virtu (discussed previously) and the registered Direct Offering of March 2023
(discussed below) during which common shares were issued, the down round features of the July 2022 and August 2022 Warrants were triggered. In this respect, during the six months ended June 30, 2023, the down round features were triggered on eight different dates, leading to
a combined effect of an approximate value of $256 and $533, for the July 2022 and the August
2022 Warrants, respectively, which were accounted for as deemed dividends. The deemed dividends resulting from the re-valuation of the July 2022
and August 2022 Warrants are deducted from the net income to arrive to the net income available to common stockholders (Note 10). The fair values of the warrants, that were assessed on the dates of triggering of the down-round features as discussed previously, were determined
through Level 3 of the fair value hierarchy as defined in FASB guidance for Fair Value Measurements, as they are derived by using significant unobservable inputs
such as historical volatility.
As of June
30, 2023, the Company had 11,439,272 common shares outstanding, and 4,122,921 common shares that potentially could be issued upon exercise
of the outstanding Class A Warrants, July Warrants and August Warrants as
at June 30, 2023.
(g) Registered Direct
Offering of March 2023: On March
3, 2023, the Company completed a registered direct offering of (i) 5,556,000 of its common shares, $0.01 par value per share, (ii) Series A Warrants to purchase up to 3,611,400 common shares and (iii) Series B Warrants to purchase up to 4,167,000
common shares directly to several institutional investors. Each Series A Warrant and each Series B Warrant are immediately exercisable upon issuance for one common share at an exercise price of $2.25 per share and expire five years after the issuance date. Both Series A and
Series B Warrants have similar terms with the Class A Warrants, with the only significant difference being the “alternative cashless exercise feature” included in the Series A Warrants. In particular, each Series A Warrant could become exchangeable for one common share beginning on
the earlier of 30 days following the closing of the Offering and the date on which the cumulative trading volume of the
Company’s common shares following the date of entry into a securities purchase agreement with the purchasers in this offering exceeds 15,000,000
shares. The alternative cashless exercise provisions were met on March 7, 2023. The
Company concluded that the Series B warrants met the criteria for equity classification while the alternative cashless exercise of the Series A Warrants, precludes the Series A Warrants from being considered indexed to the Company’s
stock. In this respect, the Company recorded the Series A Warrants as noncurrent liabilities under Fair value of warrants’ liability on the accompanying consolidated balance sheet, with subsequent changes in their respective fair values
recognized in line “Changes in fair value of warrants’ liability” in the accompanying unaudited interim consolidated statement of operations. Estimating fair values of liability-classified financial instruments requires the development of estimates that may, and are likely to, change over the
duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of the Company’s common stock. Because liability-classified financial instruments are carried at fair value, the Company’s financial results will reflect the volatility and changes in these estimates and assumptions. At closing, the Company received proceeds of $11,438, net of placement agent’s fees and
expenses. As of the date the Company completed the registered direct offering, the Company valued the Series A Warrants using the Black-Scholes model with a fair value of $1.11 per Series A Warrant or $4,008 in
aggregate, while the remaining gross proceeds of the offering amounting to $8,492 (net proceeds of $7,770) where allocated to common shares and Series B warrants with the residual value method. Issuance costs of $340 were expensed immediately in a prorated manner, taking into account the portion of the liability recorded at inception included in
Interest and finance costs in the accompanying unaudited interim consolidated statements of operations. As of June
30, 2023 the Company received notices of alternative cashless exercises for 3,164,850 Series A
Warrants for equal amount of common shares and marked the warrants to their fair value at the settlement date and then settling the warrant liability. As of June 30, 2023,
the Company re-valued 446,550 outstanding Series A Warrants using Black-Scholes model with a fair value of $353. The gain of $966
resulting from the change in the fair value of the liability for the unexercised warrants and the settlements of the liability throughout the period was recorded as a change in fair value of the warrant liability and is presented
in “Change in fair value of the warrant’s liability” in the accompanying consolidated statements of operations. The Series A Warrants fair value as of settlement and
measurement dates per discussion above, was determined through Level 2 inputs of the fair value hierarchy as determined by management. The fair value of the
Series A Warrants weighted the probability that the Series A Warrants are alternatively cashless exercised for common shares, while the Black & Scholes model was applied under the following assumptions: (a) expected volatility (d)
risk free rate (e) market value of common stock of, which was the current market price as of the date of each fair value measurement. Fair value sensitivity is driven by the stock price at the time of valuation and is limited in terms
of the other parameters. The aggregate amount of outstanding warrants Series A and Series B as of June 30, 2023, were 446,550 and 4,167,000, respectively.
(h) Share Buy-Back Plan: In April 2023, the Company’s Board of Directors
authorized a share repurchase program to purchase up to an aggregate of $2,000 of the Company’s common shares. During the six months ended June 30, 2023, the Company re-purchased 1,693,983 common shares of value $1,437.
(i) NASDAQ Notification: On April
18, 2023, the Company received written notification from NASDAQ, indicating that because the closing bid price of the Company’s common stock for 30
consecutive business days, from March 6, 2023 to April 17, 2023, was below the
minimum $1.00 per share bid price requirement for continued listing on The NASDAQ Capital Market, the Company is not in compliance with Nasdaq Listing Rule 5550(a)(2). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the applicable grace period to regain compliance is 180 days, or until October 16, 2023. The Company intends to cure this deficiency within the prescribed time period.
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