Note 4 - Warrants

6 Months Ended

Jun. 30, 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:

	June 30, 2022	December 31, 2021
Risk-free interest rate	2.6% to 3.0%	0.1% to 1.1%
Volatility	54.5% to 112.4%	71.8% to 114.5%
Expected life (years)	0.6 to 3.1	0.1 to 3.6
Dividend yield	—%	—%

A summary of the Company's liability classified warrant activity during the six months ended June 30, 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 June 30, 2022		2,656,296		$	6.30	$	16.80	$	9.49		2.2
Exercisable at June 30, 2022		2,656,296		$	6.30	$	16.80	$	9.49		2.2

For a summary of the changes in fair value associated with the Company's warrant liability for the six months ended June 30, 2022, see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.

Equity Classified Warrants

In June 2022, the Company granted equity-classified warrants to purchase 50,000 shares of common stock with a ten-year term and an exercise price of $1.49 vesting annually over four 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 first anniversary of the agreement; 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. 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. Additionally, both the April 2021 and August 2021 warrants vest in full if there is a change of control event, as defined in the agreements.

At June 30, 2022, the Company had 446,502 equity classified warrants outstanding and 193,710 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 $11,000 for the three months ended  June 30, 2022 and 2021, respectively. The Company recorded stock compensation expense for equity classified warrants of $166,000 and $11,000 for the six months ended June 30, 2022 and 2021, respectively. At  June 30, 2022, there was $451,000 of unrecognized stock compensation expense related to the Company's equity classified warrants.