Fair Value Measurements

6 Months Ended

Jun. 30, 2023

Fair Value Measurements

Fair Value Measurements

9. Fair Value Measurements

The Company follows accounting guidance that emphasizes that fair value is a market-based measurement, not an entity specific measurement. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements are defined on a three level hierarchy:

Level 1 inputs: Unadjusted quoted prices for identical assets or liabilities in active markets;

Level 2 inputs: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, whether directly or indirectly, for substantially the full term of the asset or liability;

Level 3 inputs: Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

The fair value of financial instruments measured on a recurring basis as of June 30, 2023 and December 31, 2022 are as follows:

	As of June 30, 2023
Description	Total		Level 1		Level 2		Level 3
Liabilities:
Warrant liabilities	$	975	$	—	$	975	$	—
Total liabilities at Fair Value	$	975	$	—	$	975	$	—

	As of December 31, 2022
Description	Total		Level 1		Level 2		Level 3
Liabilities:
Warrant liabilities	$	10,796	$	—	$	—	$	10,796
Total liabilities at Fair Value	$	10,796	$	—	$	—	$	10,796

The fair value of the 2022 Series A Warrants and 2022 Series B Warrants (collectively, the “2022 Warrants”) was determined using a Monte Carlo simulation at December 31, 2022. This valuation technique involved a significant amount of estimation and judgment. In general, the assumptions used in calculating the fair value of the common stock warrant liability represent management’s best estimate, but the estimate involves inherent uncertainties and the application of significant management judgment. At December 31, 2022, these warrant liabilities fell within Level 3 of the fair value hierarchy.

However, due to the cashless exercise provision of the 2022 Warrants rendering the exercise price effectively at zero, the calculated price per share of the 2022 Warrants was equal to that of a share of common stock. Based on this result, the Company changed its valuation methodology during the six months ended June 30, 2023 and determined that the fair

value of the warrants are equal to the underlying stock price at June 30, 2023. Therefore, as of June 30, 2023, these warrant liabilities fell within Level 2 of the fair value hierarchy.

The following table provides a roll-forward of the warrant liabilities measured at fair value for the six months ended June 30, 2023:

		Six Months Ended
		June 30,
		2023
Balance at beginning of period	$	10,796
Change in fair value of warrant liabilities		(2,988)
Reclass of warrant liabilities upon exercise of warrants		(6,833)
Balance at end of period	$	975