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Fair Value

9 Months Ended

Sep. 30, 2023

Fair Value Disclosures [Abstract]

14.

Fair Value

The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value (in thousands).


Description:		Level				September 30, 2023				December 31, 2022
Convertible Notes			3			$	1,446			$	10,911
Warrant liability			3				4,455				374
Convertible Notes and warrant liability, at fair value						$	5,901			$	11,285

Convertible Notes

The Company accounts for its Convertible Notes under ASC 815, Derivatives and Hedging (“ASC 815”), and as such has elected to account for the instrument under the fair value option under ASC 825. Using the fair value option, the Convertible Notes are required to be recorded at initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the notes are recognized as non-cash changes in the fair value of the Convertible Notes in other income (expense), net in the Company’s unaudited condensed consolidated statements of operations. The fair value of the conversion feature of the Convertible Notes were valued utilizing the Monte Carlo simulation model.

As a result of applying the fair value option, direct costs and fees related to the Convertible Notes were expensed as incurred and were not deferred.

The following table provides the fair value and contractual principal balance outstanding of the Convertible Notes accounted for under the fair value option as of September 30, 2023 and December 31, 2022:

Schedule of fair value option
		September 30, 2023				December 31, 2022
Convertible Notes fair value		$	1,446			$	10,911
Convertible Notes, contractual principal outstanding			1,303				10,000
Fair value less unpaid principal balance		$	143			$	911

The estimated fair value of the Convertible Notes was based on the following significant inputs:


		September 30, 2023								December 31, 2022
		First Tranche				Second Tranche				First Tranche

Risk-free interest rate			5.42	%			5.35	%			4.46	%
Time to expiration (in years)			1.09				1.26				1.84
Expected volatility			95	%			95	%			85	%
Dividend yield			—				—				—
Stock price		$	0.20			$	0.20			$	3.25
Original face value		$	10,000,000			$	10,000,000			$	10,000,000
Fixed conversion rate		$	0.64			$	0.75			$	15.00
Roll-forward discount rate			6.03	%			20.85	%			5.11	%

Warrant Liability

The Common Stock Warrants are accounted for as liabilities pursuant to ASC 815-40 and are measured at fair value as of each reporting period. Changes in the fair value of the warrants are recorded in other income (expense), net in the unaudited condensed consolidated statements of operations each period. Changes in fair value of the liability resulting from the cumulative changes in instrument-specific credit risk will be presented in accumulated other comprehensive income. As of September 30, 2023, there were no changes in the liability related to credit risk.

The Common Stock Warrants are valued using a Monte Carlo simulation model, except for the Series B Warrants, which are valued using the Black Scholes simulation models, all of which are considered to be Level 3 fair value measurements. Inherent in an options pricing models are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

The following tables provide quantitative information regarding Level 3 fair value measurements for Common Stock Warrants September 30, 2023 and December 31, 2022.

Schedule of fair value measurements
		September 30, 2023																				December 31, 2022
		First Tranche				Purchase Agreement Amendment				Second Tranche				Series B Warrants				August 2023				First Tranche

Risk-free interest rate			4.60	%			4.60	%			4.60	%			4.66	%			4.60	%			4.46	%
Time to expiration (in years)			4.09				4.26				4.26				4.40				2.86				1.84
Expected volatility			100	%			100	%			100	%			125	%			100	%			85	%
Dividend yield			—				—				—				—				—				—
Stock price		$	0.20			$	0.20			$	0.20			$	0.20			$	0.20			$	3.25
Exercise price		$	0.59			$	0.58			$	0.69			$	1.56			$	0.30			$	15.00

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.

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