XML 26 R16.htm IDEA: XBRL DOCUMENT

Financial Instruments Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Financial Instruments Fair Value Measurements

Note 10 — Financial Instruments Fair Value Measurements

Recurring Fair Value Measurements

The fair value hierarchy table for the reporting date noted is as follows:

		Fair Value Measurement on a Recurring Basis at Reporting Date Using⁽¹⁾
		Level-1 Inputs				Level-2 Inputs				Level-3 Inputs				Total
September 30, 2022
Senior Secured Convertible Note - April 2022		$	—			$	—			$	23,500			$	23,500
Senior Secured Convertible Note - September 2022		$	—			$	—			$	12,000			$	12,000
Totals		$	—			$	—			$	35,500			$	35,500

⁽¹⁾

As noted above, as presented in the fair value hierarchy table, Level-1 represents quoted prices in active markets for identical items, Level-2 represents significant other observable inputs, and Level-3 represents significant unobservable inputs. There were no transfers between the respective Levels during the period ended September 30, 2022.

Note 10 — Financial Instruments Fair Value Measurements - continued

As discussed in Note 11, Debt, the Company issued Senior Secured Convertible Notes dated April 4, 2022 and September 8, 2022, with an initial $27.5 million face value principal (“April 2022 Senior Convertible Note”) and an initial $11.25 million face value principal (“September 2022 Senior Convertible Note”), respectively. Both convertible notes are accounted for under the ASC 825-10-15-4 fair value option (“FVO”) election, wherein, the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date.

The estimated fair value of the financial instruments classified within the Level 3 category was determined using both observable inputs and unobservable inputs. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs.

The estimated fair value of the April 2022 Senior Convertible Note as of each of April 4, 2022 and September 30, 2022, and the estimated fair value of the September 2022 Senior Convertible Note as of each of September 8, 2022 and September 30, 2022 were computed using a Monte Carlo simulation of the present value of its cash flows using a synthetic credit rating analysis and a required rate-of-return, using the following assumptions:

Schedule of Fair Value Assumption Used

		April 2022 Senior Convertible Note: April 4, 2022				September 2022 Senior Convertible Note: September 8, 2022				April 2022 Senior Convertible Note: September 30, 2022				September 2022 Senior Convertible Note: September 30, 2022
Fair Value		$	30,100			$	12,200			$	23,500			$	12,000
Face value principal payable		$	27,500			$	11,250			$	22,511			$	11,250
Required rate of return			7.875	%			7.875	%			11.50	%			11.60	%
Conversion Price		$	5.00			$	5.00			$	5.00			$	5.00
Value of common stock		$	1.26			$	1.21			$	0.86			$	0.86
Expected term (years)			2.00				2.00				1.30				1.94
Volatility			115.00	%			120.00	%			135.00	%			135.00	%
Risk free rate			2.40	%			3.42	%			4.02	%			4.12	%
Dividend yield			—	%			—	%			—	%			—	%

The estimated fair values reported utilized the Company’s common stock price along with certain Level 3 inputs (as discussed above), in the development of Monte Carlo simulation models, discounted cash flow analyses, and /or Black-Scholes valuation models. The estimated fair values are subjective and are affected by changes in inputs to the valuation models and analyses, including the Company’s common stock price, the Company’s dividend yield, the risk-free rates based on U.S. Treasury security yields, and certain other Level-3 inputs including, assumptions regarding the estimated volatility in the value of the Company’s common stock price. Changes in these assumptions can materially affect the estimated fair values.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details