Note 4 - Warrants

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Warrants Disclosure [Text Block]

4. Warrants

Liability Classified Warrants

The Company uses the Black-Scholes option pricing model (BSM) 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 Company's outstanding liability classified warrants are as follows:

	September 30, 2023	December 31, 2022
Risk-free interest rate	5.1% to 5.6%	4.2% to 4.8%
Volatility	69.1% to 89.8%	63.1% to 76.3%
Expected life (years)	0.2 to 1.9	0.1 to 2.6
Dividend yield	—%	—%

A summary of the Company's liability classified warrant activity during the nine months ended September 30, 2023 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, 2023		2,656,296		$	6.30	$	16.80	$	9.49		1.7
Expired warrants		(384,415	)	$	13.92	$	16.80	$	16.22		—
Balance at September 30, 2023		2,271,881		$	6.30	$	12.12	$	8.26		1.1
Exercisable at September 30, 2023		2,271,881		$	6.30	$	12.12	$	8.26		1.1

For a summary of the changes in fair value associated with the Company's warrant liability for the nine months ended September 30, 2023, see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.

Equity Classified Warrants

In August 2023, the Company granted equity-classified warrants to purchase up to 100,000 shares of Company common stock with a five-year term and an exercise price of $0.62. The warrants vest based on performance of certain services. As of September 30, 2023, no related vesting criteria were met.

In June 2023, the Company granted equity-classified warrants to purchase 150,000 shares of common stock with a ten-year term and an exercise price of $0.60 vesting annually over four years while services are being performed. 

At September 30, 2023, the Company had 896,501 equity classified warrants outstanding and 424,084 warrants were exercisable. At  December 31, 2022, the Company had 646,501 equity classified warrants outstanding and 400,859 warrants were exercisable.

The Company recorded stock compensation expense for the non-employee consulting agreements of $50,000 and $232,000 for the three months ended  September 30, 2023 and 2022, respectively, and $142,000 and $398,000 for the nine months ended September 30, 2023 and 2022, respectively. At  September 30, 2023, there was $446,000 of unrecognized stock compensation expense related to the Company's equity classified warrants.