Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2023

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.