Fair Value

6 Months Ended

Jun. 30, 2023

Note 13—Fair value

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value measurements are based on a fair value hierarchy, based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

•Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted market prices for similar assets and

liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amount of Cash and cash equivalents, Restricted cash, Accounts receivable, Inventory, and Accounts payable and accrued expenses, as reflected on the unaudited interim condensed consolidated balance sheets, approximate fair value because of the short-term maturity of these instruments. These estimated fair values may not be representative of actual values of the financial instruments that could have been realized or that will be realized in the future.

The warrant liabilities (see Note 12—Warrant liabilities), promotional agreements (see Note 16—Commitments and contingencies), and derivative instruments (see Note 11—Derivative instruments) are Level 3 instruments and use internal models to estimate fair value using certain significant unobservable inputs which require determination of relevant inputs and assumptions. Accordingly, changes in these unobservable inputs may have a significant impact on fair value. Such inputs include risk free interest rate, expected dividend yield, expected volatility, and expected vesting date. The Level 3 liabilities generally decrease (increase) in value based upon an increase (decrease) in risk free interest rate, expected vesting date, and expected dividend yield. Conversely, the fair value of these Level 3 liabilities generally increases (decreases) if the expected volatility were to increase (decrease).

The inputs for determining fair value of the embedded Exit Fee and Applicable Premium are Level 3 instruments. Refer to Note 11—Derivative instruments for further discussion related to the inputs and accounting for these instruments.

The following table summarizes the Company’s total Level 3 liability activity for the three and six months ended June 30, 2023 (in thousands):


	Derivative Liability		Total Level 3 Liabilities
Fair value as of January 1, 2023	$	—	$	—
Initial measurement on February 14, 2023	23,532		23,532

Fair value as of March 31, 2023	$	23,532	$	23,532
Change in fair value of derivative liability	3,361		3,361
Fair value as of June 30, 2023	$	26,893	$	26,893

The following table summarizes the Company’s total Level 3 liability activity for the three and six months ended June 30, 2022 (in thousands):


	Warrant Liabilities		Promotional Agreements		Total Level 3 Liabilities
Fair value as of January 1, 2022	$	—	$	4,474	$	4,474
Change in valuation of promotional agreements	—		1,588		1,588
Issuance of common stock pursuant to promotional agreement awards	—		(2,963)		(2,963)
Fair value as of March 31, 2022	$	—	$	3,099	$	3,099
Issuance of Warrants	8,918		—		8,918
Exercise of put option on Immediately Exercisable Warrants	(4,460)		—		(4,460)
Change in valuation of promotional agreements	—		(966)		(966)
Change in fair value - warrant liabilities(1)	(1,265)		—		(1,265)
Fair value as of June 30, 2022	$	3,193	$	2,133	$	5,326

(1) Change in fair value - warrant liabilities is recognized in the unaudited interim condensed consolidated statements of operations and

comprehensive loss.

- Definition

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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