Note 5 - Warrants to Purchase Common Stock

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

5. Warrants to Purchase Common Stock

Costs attributable to the issuance of warrants to purchase common stock are measured at fair value at the date of issuance and offset with a corresponding increase in ‘Additional Paid in Capital’ at the time of issuance.

Until January 1, 2021, the fair value cost was computed utilizing the Black-Scholes model using the following inputs: the price of the Company’s common stock on the date of issuance, a risk-free interest rate based on applicable treasury rates, and expected volatility of the Company’s common stock of based on historical volatility, various exercise prices, and terms reflecting the term of the warrant issued.

Beginning January 1, 2021, the Company computes fair value cost using the Cox-Ross-Rubinstein binomial model. During the period ended December 31, 2021, the Company estimated the fair value of the warrants based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock on the date of issuance, a risk-free interest rate of 1.30%, and expected volatility of 50% based on the volatility of comparable publicly traded entities, various exercise prices, and terms of up to 10 years.

Concurrently with the execution of certain securities purchase agreements during 2020, the Company issued warrants to purchase common stock. Each warrant is exercisable for a period of one to five years from the date of the securities purchase agreement. The fair value cost at the date of issuance of these warrants was $639,194.

In conjunction with the issuance of convertible notes payable during 2020 as described in Note 7, a warrant for the purchase of up to 115,385 shares of common stock exercisable for a one-year period was issued at an exercise price of $0.01 per share and warrants for the purchase of up to 360,000 shares of common stock exercisable for a five-year period was issued at an exercise price of $1.00 per share.

On September 11, 2021, the Company issued Robert Winspear, Chief Financial Officer, Secretary and a director of the Company, a warrant to purchase up to 100,000 shares of common stock exercisable for a ten-year period at an exercise price of $1.95. The warrant vests monthly over 36 months after the issuance date. The fair value of the warrant at the issuance date was $382,571, which is being expensed as vesting occurs.

On September 11, 2021, the Company issued warrants to purchase up to a total of 32,129 shares of common stock exercisable for a ten-year period at an exercise price of $1.95. The warrants vested on the issuance date. The fair value of these warrants at the issuance date was $122,916, which was expensed at issuance.

On November 9, 2021, as part of the Underwriting Agreement (Note 3), the Company issued a warrant to purchase up to 144,000 shares of common stock exercisable for a five-year period at an exercise price of $6.25 per share.

The following table presents the Company’s warrants as of December 31, 2021 and 2020:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (in years)
Warrants as of December 31, 2019		84,295		$	1.95		4.45
Issued		510,644		$	0.84		5.00
Exercised		(115,385	)	$	0.01		-
Warrants as of December 31, 2020		479,554		$	1.24		4.34
Issued		328,731		$	3.77		7.01
Exercised		(249,949	)	$	1.04		3.77
Warrants as of December 31, 2021		558,336		$	3.28		5.09

At December 31, 2021, warrants for the purchase of 469,450 shares of common stock were vested and warrants for the purchase of 88,886 shares of common stock remained unvested. The Company expects to incur expenses for the unvested warrants totaling $340,056 as they vest.