Stockholders' Equity |
9 Months Ended |
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Sep. 30, 2022 | |
| Stockholders' Equity | |
| Stockholders' Equity |
6Stockholders’ Equity The Company’s certificate of incorporation, adopted on December 16, 2020, authorizes the issuance of two classes of stock: 43,000,000 shares of common stock and 2,000,000 shares of stock, each with a par value of $0.0001 per share. Overallotment Option Pursuant to the Underwriting Agreement and in connection with the Offering, the Company granted the Underwriter a overallotment option to purchase up to 1,500,000 shares at the public offer price. As of September 30, 2022, the overallotment option (the “Underwriters Option”) had not been exercised by the Underwriter. The Underwriters Option is not compensation, but a financial instrument paid for in the transaction, therefore, the Underwriters Option was evaluated to determine if it should be treated as an embedded or a separate free-standing financial instrument (i.e., to determine whether it needed to be bifurcated and accounted for as a separate financial instrument). As the rights and obligations related to the Option Shares are separate from the rights and obligations related to the Firm Shares and the exercise or termination of the Underwriters Option does not impact the Firm Shares under the Underwriting Agreement, the Company determined that the Underwriters Option is considered a free-standing financial instrument. The Company then considered the classification of the Underwriters Option as a liability or equity under ASC 480, Distinguishing Liability from Equity, and it was determined that the Underwriters Option did not meet the criteria for liability classification as the underlying instrument is not mandatorily redeemable, it does not require the Company to buy back its shares, it is fixed in nature and its value is tied to the Company’s common stock share price. As an equity-linked contract, the Company then considered applicability of ASC 815-40, Derivatives and Hedging, and determined that the Underwriters Option is a derivative that meets all the criteria and qualifies for equity classification without recurring remeasurement to fair value. The Underwriters Option had an aggregate grant date fair value of $93,827 that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option pricing model include: (1) discount rate of 2.82% based on the daily yield curve rates for U.S. Treasury obligations, (2) expected life of , (3) expected volatility of 88.6% based on the average historical volatility of comparable companies' stock, (4) no expected dividends and (5) fair market value (Offering price) of the Company's stock of $0.50 per share. The Underwriters Option expired unexercised on November 3, 2022. |