Quarterly report pursuant to Section 13 or 15(d)

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2022
Summary of Significant Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 3 - Summary of Significant Accounting Policies


Basis of Presentation


All amounts are presented in U.S. Dollars.


Use of Estimates


The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods. Actual results could differ from these estimates. The Company’s significant estimates and assumptions include the fair value of financial instruments, stock-based compensation and the valuation allowance relating to the Company’s deferred tax assets.


Reverse Stock Split


On September 23, 2022, the Company effected a reverse stock split of its Common Stock at a ratio of 1-for-30. No fractional shares were issued in connection with the reverse stock split. Stockholders of record who would have otherwise been entitled to receive a fractional share received a cash payment in lieu thereof. All information presented in the accompanying unaudited condensed consolidated financial statements, unless otherwise indicated herein, reflects a 1-for-30 reverse stock split of the Company’s outstanding shares of Common Stock, and unless otherwise indicated, all such amounts and corresponding conversion price or exercise price data set forth herein have been adjusted to give effect to such reverse stock split.

Concentrations of Credit Risk


The Company maintains deposits in a financial institution which is insured by the Federal Deposit Insurance Corporation (“FDIC”). At various times, the Company has deposits in this financial institution in excess of the amount insured by the FDIC. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.




Investments as of September 30, 2022 and December 31, 2021 consist of U.S. Treasury Bills, which are classified as held-to-maturity, totaling $14.1 million and $21.3 million, respectively. The Company determines the appropriate balance sheet classification of its investments at the time of purchase and evaluates the classification at each balance sheet date. All of the Company’s U.S. Treasury Bills mature within the subsequent twelve months from the date of purchase. Unrealized gains and losses were de minimus. As of September 30, 2022 and December 31, 2021, the carrying value of the Company’s U.S. Treasury Bills approximates their fair value due to their short-term maturities.


Common Stock Purchase Warrants


The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) provided that such contracts are indexed to the Company’s own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).


The Company assesses classification of its common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between assets, liabilities and equity is required.  The Company’s free-standing derivatives consist of warrants to purchase common stock that were issued in connection with its notes payable and a private offering. The Company evaluated these warrants to assess their proper classification using the applicable criteria enumerated under U.S. GAAP and determined that the common stock purchase warrants meet the criteria for equity classification in the accompanying balance sheets as of September 30, 2022 and December 31, 2021.


Share-Based Payment


The Company accounts for share-based payments using the fair value method. For employees and directors, the fair value of the award is measured, as discussed below, on the grant date. For non-employees, fair value is generally valued based on the fair value of the services provided or the fair value of the equity instruments on the measurement date, whichever is more readily determinable. The Company accounts for performance-based share payments by measuring the fair value of the grant when the performance criteria are deemed probable and recognizing the associated expense at that time. The Company has granted stock options at exercise prices equal to the closing price of the Company’s common stock as reported by The Nasdaq Capital Market, with input from management on the date of grant. Upon exercise of an option or warrant, the Company issues new shares of common stock out of its authorized shares.


The weighted-average fair value of options and warrants has been estimated on the grant date or measurement date using the Black-Scholes pricing model. The fair value of each instrument is estimated on the grant date or measurement date utilizing certain assumptions for a risk-free interest rate, volatility and expected remaining lives of the awards. The risk-free interest rate used is the United States Treasury rate for the day of the grant having a term equal to the life of the equity instrument. The volatility percentage used was derived from the Company’s share price equal to the expected term of the option grant. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future.


The weighted-average Black-Scholes assumptions are as follows:


    For the Three Months
Ended September 30,
    For the Nine Months
Ended September 30,
    2022     2021     2022     2021  
Expected life   6.25 years     6.25 years     6.25 years     6.25 years  
Risk free interest rate     3.06 %     0.91 %     2.03 %     1.05 %
Expected volatility     92 %     91 %     92 %     91 %
Expected dividend yield     0 %     0 %     0 %     0 %
Forfeiture rate     0 %     0 %     0 %     0 %


As of September 30, 2022, total unrecognized stock option compensation expense was $4.6 million, which will be recognized as those options vest over a period of approximately four years. The amount of future stock option compensation expense could be affected by any future option grants or by any option holders leaving the Company before their grants are fully vested.


Net Loss Per Share of Common Stock


Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted net earnings per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock.  Potentially dilutive securities are excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive and consist of the following:


    As of September 30,  
    2022     2021  
Options     332,551       372,154  
Warrants     1,178,169       493,358  
Totals     1,510,720       865,512  


Recent Accounting Pronouncements


There were no recently issued accounting standards not yet adopted which would have a material effect on the Company’s consolidated financial statements or related disclosures.