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Fair Value Measurements

9 Months Ended

Sep. 30, 2023

ASC 820, Fair Value Measurements and Disclosures, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability.

U.S. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As presented in the tables below, this hierarchy consists of three broad levels:

•Level 1: Quoted prices in active markets for identical assets and liabilities.

•Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.

•Level 3: Significant inputs to the valuation model are unobservable and significant to the overall fair value measurement of the assets or liabilities. Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, investments in marketable debt securities, available-for-sale, accounts payable, other current liabilities, warrants, earn-out shares liability, convertible debt and the associated derivative liability. The fair value of cash and accounts receivable approximates carrying value due to their short-term maturity.

As required by ASC 820, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. Derivative financial instruments which are required to be measured at fair value on a recurring basis are measured at fair value using Level 3 inputs for all periods presented. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities carried at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands):


	September 30, 2023
	Fair Value		Level 1		Level 2		Level 3





Financial Assets
Cash and Cash Equivalents(1):
Money market funds	$	8,804	$	8,804	$	—	$	—
Total Financial Assets	$	8,804	$	8,804	$	—	$	—

Financial Liabilities:
Private Placement Warrants	$	5	$	—	$	5	$	—
Public Warrants	522		522		—		—
Derivative Liabilities	14		—		—		14
Contingent Earn-out Shares liability	115		—		—		115
Total Financial Liabilities	$	656	$	522	$	5	$	129

____________

(1) Included in total cash and cash equivalents in the condensed consolidated balance sheets.


	December 31, 2022
	Fair Value		Level 1		Level 2		Level 3





Financial Assets
Cash and Cash Equivalents(1):
Money market funds	$	22,481	$	22,481	$	—	$	—
Corporate debt security	2,199		2,199		—		—
	24,680		24,680		—		—
Short-Term Investments:
U.S. treasuries	2,181		2,181		—		—
Corporate debt security	39,564		—		39,564		—
Asset-backed security and other	5,248		—		5,248		—
Non-U.S. government and supranational bonds	3,655		—		3,655		—
	50,648		2,181		48,467		—
Total Financial Assets	$	75,328	$	26,861	$	48,467	$	—

Financial Liabilities:
Private Placement Warrants	$	7	$	—	$	7	$	—
Public Warrants	654		654		—		—
Derivative Liabilities	405		—		—		405
Contingent Earn-out Shares liability	564		—		—		564
Total Financial Liabilities	$	1,630	$	654	$	7	$	969

____________

(1) Included in total cash and cash equivalents in the condensed consolidated balance sheets.

The changes in the fair value of Level 3 financial liabilities during the three months ended September 30, 2023 consisted of the following (in thousands):


	Derivative Liabilities on Convertible Debentures		Contingent Earn-Out Shares Liability
Fair value, beginning of period	$	11	$	47
Change in fair value during the period	3		68
Fair value, end of period	$	14	$	115

The changes in the fair value of Level 3 financial liabilities during the nine months ended September 30, 2023 consisted of the following (in thousands):


	Derivative Liabilities on Convertible Debentures		Contingent Earn-Out Shares Liability
Fair value, beginning of period	$	405	$	564
Recognition of earn-out RSUs	—		(6)
Change in fair value during the period	(391)		(443)
Fair value, end of period	$	14	$	115

Significant unobservable inputs related to Level 3 earn-out shares liability consisted of the following as of September 30, 2023:


	September 30, 2023	December 31, 2022
Stock price	$0.34	$0.44
Stock price volatility	80%	80%
Expected term	2.89 years	3.64 years
Risk-free interest rate	4.8%	4.2%

Significant unobservable inputs related to Level 3 derivative liabilities consisted of the following:


	September 30, 2023	December 31, 2022
Stock price	$0.34	$0.44
Stock price volatility	80%	80%
Expected term	0.37 years	0.86 years
Risk-free interest rate	5.4%	4.6%

- 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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