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Note 5 - Fair Value of Financial Instruments
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

5. Fair Value of Financial Instruments

 

The Company’s financial instruments consist primarily of cash, cash equivalents, marketable securities, accounts payable, previously outstanding convertible notes and accrued liabilities. The Company’s cash, cash equivalents, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities. The Company determined the fair value of its previously outstanding Convertible Notes as described in Note 9.

 

The following table presents the Company’s assets that are measured at fair value on a recurring basis:

 

   

September 30, 2024

  
   

(Level 1)

    

(Level 2)

    

(Level 3)

  
                         

Assets

                        
Cash equivalents (money market accounts)   $ 6,171,726     $ —     $ —  

Marketable securities:

                        

Commercial paper

   $ —     $ 23,616,596     $ —  

U.S. treasury bonds

     —       9,410,740       —  

U.S. government agency bonds

     —       5,885,900       —  

Total assets measured at fair value

   $ 6,171,726     $ 38,913,236     $ —  
                         

 

   

December 31, 2023

  

Assets

                        

Cash equivalents (money market accounts)

   $ 7,792,846     $ —     $ —  

Total assets measured at fair value

   $ 7,792,846     $ —     $ —  

 

The fair values of the Company’s Level 2 marketable securities are estimated primarily based on benchmark yields, reported trades, market-based quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications, which represent a market approach. In general, a market approach is utilized if there is readily available and relevant market activity for an individual security. This valuation technique may change from period to period, based on the relevance and availability of market data.

 

The following is a summary of the Company's marketable securities which provides a reconciliation of amortized cost basis to fair value including cumulative unrealized gains and losses as of September 30, 2024:

 

   

Amortized Cost

    

Unrealized

gains

    

Unrealized

losses

    

Fair Value

  

Commercial paper

   $ 23,575,451     $ 41,667     $ (522 )   $ 23,616,596  

U.S. treasury bonds

     9,354,027       56,713       —       9,410,740  

U.S. government agency bonds

     5,860,596       25,304       —       5,885,900  

Total

   $ 38,790,074     $ 123,684     $ (522 )   $ 38,913,236  

 

The following table presents a roll-forward of the fair value of the Convertible Notes (Note 9) for which fair value is determined by Level 3 inputs:

 

   

Nine Months Ended

September 30,

  
   

2023

  

Balance as of January 1, 2023

   $ 12,414,000  

Fair value adjustment

     (646,000 )

Balance as of June 30, 2023

     11,768,000  

Fair value adjustment

     (4,778,251 )

Reclassification to additional paid in capital upon conversion

     (6,989,749 )

Balance as of September 30, 2023

   $ —  

 

These Convertible Notes are no longer outstanding as of September 30, 2024.

 

Valuation techniques used to measure fair value maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The Convertible Notes are classified within Level 3 of the fair value hierarchy because the fair value measurement is based, in part, on significant inputs not observed in the market.

 

There were no transfers among Level 1, Level 2 or Level 3 categories in the three and nine months ended September 30, 2024 or the year ended December 31, 2023.