| Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis |
Financial assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements at June 30, 2023 | | (Unaudited) | | Total | | | Level 1 | | Level 2 | | Level 3 | | | | | | | | | | | Assets at Fair Value: | | | | | | | | | | Current: | | | | | | | | | | Cash and cash equivalents | $ | 43,506 | | | | $ | 43,506 | | | $ | — | | | $ | — | | | Equity securities | 2,249 | | | | 2,249 | | | — | | | — | | | | | | | | | | | | Foreign bonds | 162 | | | | — | | | 162 | | | — | | | Mutual funds | 37 | | | | 37 | | | — | | | — | | | Noncurrent: | | | | | | | | | | Foreign bonds | 841 | | | | — | | | 841 | | | — | | | Total assets measured at fair value | $ | 46,795 | | | | $ | 45,792 | | | $ | 1,003 | | | $ | — | | | Liabilities at Fair Value: | | | | | | | | | | Current: | | | | | | | | | | Related-party convertible note payable | $ | (36,618) | | (1) | | $ | — | | | $ | — | | | $ | (36,618) | | | Contingent consideration obligations | (21) | | | | — | | | — | | | (21) | | | Noncurrent: | | | | | | | | | | Warrant liabilities | (27,799) | | (2) | | — | | | — | | | (27,799) | | | Total liabilities measured at fair value | $ | (64,438) | | | | $ | — | | | $ | — | | | $ | (64,438) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2022 | | Total | | | Level 1 | | Level 2 | | Level 3 | | | | | | | | | | | Assets at Fair Value: | | | | | | | | | | Current: | | | | | | | | | | Cash and cash equivalents | $ | 104,641 | | (3) | | $ | 63,860 | | | $ | 40,781 | | | $ | — | | | Equity securities | 2,507 | | | | 2,507 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | Mutual funds | 36 | | | | 36 | | | — | | | — | | | Noncurrent: | | | | | | | | | | Foreign bonds | 840 | | | | — | | | 840 | | | — | | | Total assets measured at fair value | $ | 108,024 | | | | $ | 66,403 | | | $ | 41,621 | | | $ | — | | | Liabilities at Fair Value: | | | | | | | | | | Current: | | | | | | | | | | Contingent consideration | $ | (19) | | | | $ | — | | | $ | — | | | $ | (19) | | | Noncurrent: | | | | | | | | | | Warrant liability | (21,636) | | (2) | | — | | | — | | | (21,636) | | | Total liabilities measured at fair value | $ | (21,655) | | | | $ | — | | | $ | — | | | $ | (21,655) | |
_______________ | | | | | | | (1) | As of June 30, 2023, the company had a related-party convertible note payable with a principal amount of $30.0 million, which is accounted for under the ASC 825-10-15-4 FVO election. Under the FVO election, the financial instrument was initially measured at its issue-date estimated fair value and subsequently re-measured at estimated fair value on a recurring basis at each reporting period date. The company’s other related-party notes are not accounted for under the fair value election. See Note 9, Related-Party Debt, for further information. The estimated fair value of the convertible note was computed using the binomial lattice model with the following unobservable assumptions: |
| | | | | | | June 30, 2023 | | (Unaudited) | | | | Expected market yield | 19.5 | % | | Expected volatility | 129.8 | % | | Risk-free rate | 5.5 | % |
The change in the carrying amount of the related-party convertible note at fair value was as follows (in thousands): | | | | | | | | | | | | | | | (Unaudited) | | | | | | Fair value at issuance date, March 31, 2023 | $ | 29,850 | | | | | Change in fair value | 6,768 | | | | Ending fair value, at June 30, 2023 | $ | 36,618 | | | |
| | | | | | | (2) | Third-Party Warrant Liabilities |
December 2022 Warrants In connection with the December 12, 2022 registered direct offering of common stock, the company issued 9,090,909 warrants (December 2022 Warrants). The warrants were classified as a liability at their fair value upon issuance. As of June 30, 2023, all warrants were outstanding. The estimated fair value of the warrants was computed using the Black-Scholes option pricing model with the following unobservable assumptions at the following date: | | | | | | | June 30, 2023 | | (Unaudited) | | | | Exercise price per share | $6.60 | | Expected term | 1.5 years | | Expected average volatility | 125.6 | % | | Expected dividend yield | — | | | Risk-free interest rate | 5.1 | % |
The change in the carrying amount of the December 2022 Warrants was as follows (in thousands): | | | | | | | | | | | | | | | (Unaudited) | | | | | Beginning fair value, at December 31, 2022 | $ | 21,636 | | | | | Change in fair value | (12,273) | | | | Ending fair value, at June 30, 2023 | $ | 9,363 | | | |
February 2023 Warrants In connection with the February 15, 2023 registered direct offering of common stock, the company issued 14,072,615 warrants (February 2023 Warrants). The warrants were classified as a liability at their fair value upon issuance. As of June 30, 2023, all warrants were outstanding. The estimated fair value of the warrants was computed using the Black-Scholes option pricing model with the following unobservable assumptions at the following dates: | | | | | | | | | | | | | June 30, 2023 | | Issuance Date
February 15, 2023 | | (Unaudited) | | | | | | Exercise price per share | $4.2636 | | $4.2636 | | Expected term | 1.6 years | | 2.0 years | | Expected average volatility | 117.9 | % | | 97.0 | % | | Expected dividend yield | — | | | — | | | Risk-free interest rate | 5.0 | % | | 4.6 | % |
The change in the carrying amount of the February 2023 Warrants was as follows (in thousands): | | | | | | | | | | | | | | | (Unaudited) | | | | | | Fair value at issuance date, February 17, 2023 | $ | 23,698 | | | | | Change in fair value | (5,262) | | | | Ending fair value, at June 30, 2023 | $ | 18,436 | | | |
On July 25, 2023, the company reduced the exercise price of the outstanding February 2023 Warrants from $4.2636 per share to $3.2946 per share. See Note 15, Subsequent Events, for further information. | | | | | | | (3) | As of December 31, 2022, the Level 2 measurements include $32.0 million in U.S. government agency securities and $8.8 million in corporate debt securities with original maturities of less than 90 days. |
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