NOTE 10 – WARRANTS

AlloMek Warrants

During the year ended December 31, 2022, the Company issued warrants to purchase an aggregate of 1,000,000 shares of Common Stock (the “AlloMek Warrants”) to certain sellers in connection with the acquisition of AlloMek as referenced in Note 6. The AlloMek Warrants were issued on October 11, 2022, are immediately exercisable at $1.88 per share and expire five years from the date of issuance. The total grant date fair value of the AlloMek Warrants was determined to be approximately $0.5 million, as calculated using the Black-Scholes model and were capitalized and included in intangible assets. The assumption used in the Black-Scholes calculation were as follows: volatility 55.7%; duration five years; and a risk-free rate of 4.14%.

As of December 31, 2022, 1,000,000 AlloMek Warrants were outstanding.

Alpha-5 Warrants

During the year ended December 31, 2022, the Company issued warrants to purchase an aggregate of 1,000,000 shares of Common Stock (the “Alpha-5 Warrants”)to certain sellers in connection with the acquisition of Alpha-5 as referenced in Note 6. The Alpha-5 Warrants were issued on June, 21, 2022, are immediately exercisable at $1.88 per share and expire five years from the date of issuance. The total grant date fair value of the Alpha-5 Warrants was determined to be approximately $0.4 million, as calculated using the Black-Scholes model and were recorded as an increase to additional paid-in capital. This amount was included as part of the consideration paid for the Alpha-5 acquisition and were included as part of the purchase price allocation accordingly. The assumption used in the Black-Scholes calculation were as follows: volatility 55.7%; duration five years; and a risk-free rate of 3.38%.

As of December 31, 2022, 1,000,000 Alpha-5 Warrants were outstanding.

PIPE Warrants

During the year ended December 31, 2021, the Company issued PIPE Warrants to purchase an aggregate of 8,680,000 shares of Common Stock to certain investors in connection with the November 2021 Private Placement as referenced in Note 8. The PIPE Warrants were issued on November 24, 2021, are immediately exercisable at $3.50 per share and expire five years from the date of issuance.

As of December 31, 2022 and 2021, 8,680,000 and 8,680,000 PIPE Warrants were outstanding, respectively.

IPO Warrants

During the year ended December 31, 2021, the Company issued Public Warrants to purchase an aggregate of 5,520,000 shares of Common Stock as referenced in Note 3.

Simultaneously with the consummation of the closing of the Initial Public Offering, the Company issued the underwriters a total of 276,000 Representative Warrants that became exercisable commencing six (6) months following issuance at an exercise price of $6.00 per share and expire five years from issuance. 

The Company evaluated the IPO Warrants as either equity-classified or liability-classified instruments based on an assessment of the IPO Warrants’ specific terms and applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the IPO Warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the IPO Warrants meet all of the requirements for equity classification under ASC 815, including whether the IPO Warrants are indexed to the Company’s own common stock, among other conditions for equity classification. Pursuant to such evaluation, the Company further evaluated the IPO Warrants under ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity, and concluded that the IPO Warrants do not meet the criteria to be classified in stockholders’ equity.

As of December 31, 2022 4,400,000 Public Warrants and 276,000 Representative Warrants were outstanding.  

As of December 31, 2022, the fair value of the Public Warrants was approximately $0.030 per Public Warrant based on the closing price of the Public Warrants on The Nasdaq Capital Market. The fair value of the Representative Warrants was approximately $0.031 per Representative Warrant which was based on the relative fair value to the Public Warrants.

During the year ended December 31, 2021, 1,120,000 Public Warrants were exercised at a price of $6.25 per share for total proceeds to the Company of $7.0 million.

As of December 31, 2021 4,400,000 Public Warrants and 276,000 Representative Warrants were outstanding.

As of December 31, 2021, the fair value of the Public Warrants was approximately $0.37 per Public Warrant which was determined using the Black-Scholes option pricing model with the following assumptions: exercise price of $6.25, dividend yield of 0%, term of 5 years, volatility of 61.1%, and risk-free rate of 1.22%. The fair value of the Representative Warrants was approximately $0.38 per Representative Warrant which was determined using the Black-Scholes option pricing model with the following assumptions: exercise price of $6.00, dividend yield of 0%, term of 5 years, volatility of 61.1%, and risk-free rate of 1.22%.

Warrant activity for the years ended December 31, 2022 and 2021 was as follows:

Warrants exercisable at December 31, 2022 were as follows: