Fair Value

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

(5) Fair Value

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

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Level 1 Inputs: Quoted prices for identical instruments in active markets.

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Level 2 Inputs: Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuation in which all significant inputs and significant value drivers are observable in active markets.

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Level 3 Inputs: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

All of the Company’s financial instruments are valued using quoted prices in active markets or based on other observable inputs. For accrued interest income, prepaid and other current assets, accounts payable, and accrued expenses, the carrying amounts approximate fair value because of the short maturity of these instruments. The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022:

						Fair value measurements at reporting date using
		June 30, 2023				Level 1 inputs				Level 2 inputs				Level 3 inputs

Assets:
Cash equivalents - money market funds		$	4,897,774			$	4,897,774			$	-			$	-
Government treasury bills			2,357,632				2,357,632				-				-
Commercial paper			7,339,702				-				7,339,702				-
Corporate bonds and notes			2,357,691				-				2,357,691				-
US. Government agency securities			8,720,250				-				8,720,250				-

		$	25,673,049			$	7,255,406			$	18,417,643			$	-

Liabilities:
Warrant liability		$	104,267			$	-			$	-			$	104,267
		$	25,777,316			$	7,255,406			$	18,417,643			$	104,267

						Fair value measurements at reporting date using
		December 31, 2022				Level 1 inputs				Level 2 inputs				Level 3 inputs

Assets:
Cash equivalents - money market funds		$	2,694,434			$	2,694,434			$	-			$	-
Government treasury bills			5,959,000				5,959,000				-				-
Commercial paper			14,586,930				-				14,586,930				-
Corporate bonds and notes			5,454,690				-				5,454,690				-
U.S. government agency securities			3,380,790				-				3,380,790				-

		$	32,075,844			$	8,653,434			$	23,422,410			$	-

Liabilities:
Warrant liability		$	229,856			$	-			$	-			$	229,856
		$	32,305,700			$	8,653,434			$	23,422,410			$	229,856

The following methods and assumptions were used to determine the fair value of each class of assets and liabilities recorded at fair value in the balance sheets:

Cash equivalents: Cash equivalents primarily consist of highly rated money market funds and treasury bills with original maturities to the Company of three months or less and are purchased daily at par value with specified yield rates. Cash equivalents related to money market funds and treasury bills are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices or broker or dealer quotations for similar assets.

Government treasury bills: The Company uses a third-party pricing service to value these investments. United States treasury bills are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets for identical assets and reportable trades.

Corporate bonds, notes, commercial paper and U.S. government agency securities: The Company uses a third-party pricing service to value these investments. Corporate bonds, notes and commercial paper and U.S. government agency securities are classified within Level 2 of the fair value hierarchy because they are valued using broker/dealer quotes, bids and offers, benchmark yields and credit spreads and other observable inputs.

Warrant liability: The warrant liability (which relates to warrants to purchase shares of common stock) is marked-to-market each reporting period with the change in fair value recorded to other income (expense) in the accompanying statements of operations until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified to stockholders’ equity. The fair value of the warrant liability is estimated using a Black-Scholes option-pricing model. The significant assumptions used in preparing the option pricing model for valuing the warrant liability as of June 30, 2023, include (i) volatility of 100%, (ii) risk free interest rate of 5.25%, (iii) strike price of $8.50, (iv) fair value of common stock of $5.04, and (v) expected life of 1.4 years. The significant assumptions used in preparing the option pricing model for valuing the warrant liability as of December 31, 2022, include (i) volatility of 100%, (ii) risk free interest rate of 4.41%, (iii) strike price of $8.50, (iv) fair value of common stock of $6.77, and (v) expected life of 1.9 years.

The Company’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level 1, Level 2, or Level 3 for the three and six months ended June 30, 2023.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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