XML 20 R10.htm IDEA: XBRL DOCUMENT v3.23.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements

3. Fair Value Measurements

The Company measures the following financial assets at fair value on a recurring basis. There were no transfers between levels of the fair value hierarchy during any of the periods presented. The following tables set forth the Company’s financial assets and liabilities carried at fair value categorized using the lowest level of input applicable to each financial instrument as of June 30, 2023 and December 31, 2022 (in thousands):

 

 

 

Balance at
June 30,
2023

 

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$

270

 

 

$

 

 

$

270

 

 

$

 

Derivative liability related to Term Loan

 

 

836

 

 

 

 

 

 

 

 

 

836

 

 

 

$

1,106

 

 

$

 

 

$

270

 

 

$

836

 

 

 

 

Balance at
December 31,
2022

 

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$

39

 

 

$

 

 

$

39

 

 

$

 

Derivative liability related to Term Loan

 

 

1,088

 

 

 

 

 

 

 

 

 

1,088

 

 

$

1,127

 

 

$

 

 

$

39

 

 

$

1,088

 

 

The Company maintains money market accounts classified as restricted cash, which are Level 1 assets, for $0.6 million at June 30, 2023 and $1.6 million at December 31, 2022 (Note 4).

The Company estimated the fair value of the warrant issued in conjunction with the Series A redeemable convertible preferred stock in August of 2022 (the “Series A Warrant”) (Note 7) using the Black-Scholes Model, which uses multiple inputs including the Company’s stock price, the exercise price of the warrant, volatility of the Company’s stock price, the risk-free interest rate and the expected term of the warrant.

The estimated fair value of the Series A Warrant at June 30, 2023 was determined using the following assumptions:

 

Risk-free interest rate

 

 

4.20

%

Expected dividend yield

 

 

0.00

%

Expected volatility

 

 

129.00

%

Expected term

 

4.63

 

 

The Company estimated the fair value of the Common Stock Warrant issued in February of 2023 (the “Common Stock Warrant”) (Note 7) using both the Black-Scholes Model and Monte Carlo simulation methods to model different potential settlement outcomes. These models use multiple inputs including the Company’s stock price, the exercise price of the warrant, volatility of the Company’s stock price, the risk-free interest rate and the expected term of the warrant. Such inputs may vary depending on the model applied and the underlying scenario assumptions. Key inputs included the warrant exercise price of $1.08 per share, a risk-free interest rate of 4.20%, expected volatility ranging from 129% to 192%, an expected dividend yield of 0.00%, a stock price of $0.08 (adjusted to reflect volume weighting) and an expected term ranging from zero years to 4.63 years, depending on the simulation.

The following table provides a roll-forward of the fair value of the Common Stock Warrants (in thousands):

 

Balance at December 31, 2022

 

$

 

Issuance of Common Stock Warrant

 

 

7,568

 

Settlement due to cashless exercise

 

 

(938

)

Change in fair value

 

 

1,326

 

Balance at March 31, 2023

 

$

7,956

 

Issuance of Common Stock Warrant

 

 

 

Settlement due to cashless exercise

 

 

(510

)

Change in fair value

 

 

(7,178

)

Balance at June 30, 2023

 

$

268

 

 

The Company has a single compound derivative instrument related to its Term Loan Agreement (Note 6) that requires the Company to pay additional interest of 4% per annum upon an event of default or if any obligation other than the unpaid principal amount of the Term Loan is not paid when due. Fair value is determined quarterly. The fair value at June 30, 2023 and December 31, 2022 is $0.8 million and $1.1 million, respectively, and is classified as a current liability on the balance sheet at June 30, 2023 and a non-current liability at December 31, 2022 to match the classification of the related Term Loan Agreement (Note 6).

The estimated fair value of the derivative at June 30, 2023 was determined using a probability-weighted discounted cash flow model that includes contingent interest payments under the following scenarios:

 

 

 

Probability

 

4% contingent interest beginning in Q4 2023

 

 

50

%

 

The following table provides a roll-forward of the fair value of the derivative liability related to the Term Loan (in thousands):

 

Balance at December 31, 2022

 

$

1,088

 

Change in fair value of derivative related to Term Loan

 

 

770

 

Balance at March 31, 2023

 

$

1,858

 

Change in fair value of derivative related to Term Loan

 

 

(1,022

)

Balance at June 30, 2023

 

$

836

 

 

The Company is required to disclose the fair value and the level within the fair value hierarchy for financial instruments that are not measured at fair value on a recurring basis. For certain financial instruments, including accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses, the carrying amounts approximate their fair values as of June 30, 2023 and December 31, 2022 because of their short-term nature. Cash and cash equivalents were classified as Level 1 and all other financial instruments were classified as Level 2 within the fair value hierarchy. The Company used Level 3 inputs to measure the fair value of its Term Loan Agreement. Based on these measurements, the Company concluded that the carrying value of the Term Loan Agreement approximates its fair value at June 30, 2023.