| Fair Value Measurements |
10.
|
Fair Value Measurements
|
The Company uses various inputs to measure the outstanding warrants and certain embedded conversion features associated with a convertible debt on a recurring basis to determine the fair value of the liabilities.
The following tables classify the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy:
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Fair value measured at June 30, 2023
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|
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Fair value at
|
|
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Quoted prices in
active markets
|
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Significant other
observable inputs
|
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Significant
unobservable inputs
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(in thousands)
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June 30, 2023
|
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(Level 1)
|
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|
(Level 2)
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(Level 3)
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Warrant liability
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$
|
14,410
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
14,410
|
|
|
Embedded conversion option
|
|
|
693
|
|
|
|
-
|
|
|
|
-
|
|
|
|
693
|
|
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Total fair value
|
|
$
|
15,103
|
|
|
$ |
-
|
|
|
$
|
-
|
|
|
$
|
15,103
|
|
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Fair value measured at December 31, 2022
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|
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Fair value at |
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Quoted prices in
active markets
|
|
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Significant other
observable inputs
|
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Significant
unobservable inputs
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(in thousands)
|
|
December 31, 2022
|
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(Level 1)
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(Level 2)
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(Level 3)
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Warrant liability
|
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$
|
1,416
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,416
|
|
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Embedded conversion option
|
|
|
2,340
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,340
|
|
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Total fair value
|
|
$
|
3,756
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,756
|
|
There were no
transfers among Levels 1, 2 or 3 during the three and six months ended June 30, 2023, and 2022. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and
losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g. changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated
volatilities) inputs.
Warrant Liability
Significant inputs related to the Company’s liability classified warrants are
listed below.
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June 30,
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Initial Valuation
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December 31,
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|
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2023
|
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May 2023
|
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2022
|
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Weighted average remaining life in years
|
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4.22
|
|
|
|
5.00
|
|
|
|
4.68
|
|
|
Weighted average volatility
|
|
|
103
|
%
|
|
|
84
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%
|
|
|
92
|
%
|
|
Value of underlying shares
|
|
$
|
0.022
|
|
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$
|
0.019
|
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$
|
0.005
|
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Weighted average risk free interest rate
|
|
|
4.0
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%
|
|
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3.5
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%
|
|
|
4.0
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%
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Expected dividend yield
|
|
|
0.00
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%
|
|
|
0.00
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%
|
|
|
0.00
|
%
|
A summary of the warrant liability activity for the six months
ended June 30, 2023, is as follows:
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Warrants
|
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Fair Value
|
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Fair Value
|
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(in thousands, except per share data)
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Outstanding
|
|
|
per Share
|
|
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(in thousands)
|
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Balance at December 31, 2022
|
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|
1,066,857
|
|
|
$
|
0.06
|
|
|
$
|
1,416
|
|
Issuance
|
|
|
61,389 |
|
|
|
0.01 |
|
|
|
570 |
|
|
Loss on remeasurement of warrant liability
|
|
|
-
|
|
|
|
|
|
|
|
12,424
|
|
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Balance at June 30, 2023
|
|
|
1,128,246
|
|
|
$
|
0.01
|
|
|
$
|
14,410
|
|
Embedded
Conversion Option Liability
Certain
convertible notes include a conversion option that meets the definition of a derivative liability and, accordingly, is required to be bifurcated. The fair value for the conversion option liability was determined using the Black Scholes method.
The
fair value of conversion option liability assumptions for the periods ended below:
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June 30,
2023
|
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Initial valuation
May 2023
|
|
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December 31, 2022
|
|
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|
|
|
|
|
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Conversion Price(1)
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$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
Value of underlying shares
|
|
$
|
0.022
|
|
|
$
|
0.019
|
|
|
$
|
0.005
|
|
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Interest Rate (annual) (2)
|
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5.28
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%
|
|
|
4.70
|
%
|
|
|
4.64
|
%
|
|
Volatility (annual) (3)
|
|
|
141.3
|
%
|
|
|
114.1
|
%
|
|
|
503.0
|
%
|
|
Time to Maturity (Years)
|
|
|
0.39
|
|
|
|
1.00
|
|
|
|
0.60
|
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(1) |
Based on the terms provided in the convertible promissory note
agreements to convert to common stock of the Company
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|
(2) |
Interest rate for U.S. Treasury Bonds, as of each presented period
ending date, as published by the U.S. Federal Reserve.
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(3) |
Based on a discounted historical daily volatility of the Company as of
each presented period ending date.
|
A summary of the conversion option liability
activity is as follows:
|
(in thousands)
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Conversion
Liability
|
|
|
Balance December 31, 2022
|
|
$
|
2,340
|
|
|
Initial value of new issuance
|
|
|
157
|
|
|
Change in fair value
|
|
|
(1,804
|
)
|
|
Balance June 30, 2023
|
|
$
|
693
|
|
|