Note 4 - Warrants

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Warrants Disclosure [Text Block]

4. Warrants

Liability Classified Warrants

The Company uses the Black-Scholes option pricing model to determine the fair value of its warrants at the date of issue and outstanding at each reporting date. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds linearly interpolated to obtain a maturity period commensurate with the term of the warrants. Estimated volatility is a measure of the amount by which the Company's stock price is expected to fluctuate each year during the expected life of the warrants. Only the volatility of the Company's own stock is used in the Black-Scholes option pricing model. 

The assumptions used in determining the fair value of the liability classified warrants are as follows:

	March 31, 2022	December 31, 2021
Risk-free interest rate	1.5% to 2.4%	0.1% to 1.1%
Volatility	50.0% to 112.2%	71.8% to 114.5%
Expected life (years)	0.9 to 3.4	0.1 to 3.6
Dividend yield	—%	—%

A summary of the Company's liability classified warrant activity during the three months ended March 31, 2022 and related information follows: 

	Number of Shares			Range of Warrant Exercise				Weighted Average		Weighted Average Remaining Contractual
	Under Warrant			Price per Share				Exercise Price		Life (Years)
Balance at January 1, 2022		2,723,645		$	6.30	$	16.80	$	9.46		2.6
Expired		(67,349	)		8.10		9.00		—		—
Balance at March 31, 2022		2,656,296		$	6.30	$	16.80	$	9.49		2.4
Exercisable at March 31, 2022		2,656,296		$	6.30	$	16.80	$	9.49		2.4

For a summary of the changes in fair value associated with the Company's warrant liability for the three months ended March 31, 2022, see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.

Equity Classified Warrants

In April 2021, the Company granted equity-classified warrants to purchase 71,500 shares of common stock with a five-year term and an exercise price of $3.63 vesting quarterly over five years while services are being performed. In August 2021, the Company entered into a portfolio development advisory agreement with a related party entity, associated with Dr. Waldemar Priebe, and in connection with the agreement, the Company granted equity-classified warrants to purchase 250,000 shares of common stock with a ten-year term and an exercise price of $3.08. The August 2021 warrants vest as follows: (a) 50% vests upon execution of the agreement, provided the advisor does not terminate the agreement prior to the end of the one-year term; and (b) 50% vests 60 days after the end of the one-year term, subject to the Company's Board of Directors determining that the services provided have been adequately performed. Also, both the April 2021 and August 2021 warrants vest in full if there is a change of control event, as defined in the agreement.

At March 31, 2022, the Company had 396,502 equity classified warrants outstanding and 190,135 warrants were exercisable. At  December 31, 2021, the Company had 396,502 equity classified warrants outstanding and 186,560 warrants were exercisable.

The Company recorded stock compensation expense for equity classified warrants of $83,000 and zero for the three months ended  March 31, 2022 and 2021, respectively. At  March 31, 2022, there was $465,000 of unrecognized stock compensation expense related to the Company's equity classified warrants.