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FAIR VALUE MEASUREMENTS | NOTE 13 – FAIR VALUE MEASUREMENTS
ASC 820, Fair Value Measurements and Disclosures, establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
The Company measures the fair value of its warrants to purchase up to 3,971,000 shares of the Company’s common stock issued in connection with the RDO Purchase Agreement using a Black-Scholes model, which requires the use of several inputs, including the underlying stock price, exercise price, risk free rate, expected volatility, and time to expiration. The inputs used in the Black-Scholes model are classified as Level 2 inputs in the fair value hierarchy.
The following table provides a summary of the assumptions used in the Black-Scholes model to estimate the fair value of the warrants at issuance date of February 6, 2023:
The Company considers these assumptions to be reasonable, based on the historical performance of the underlying stock and other market factors. However, actual results may differ from these estimates. We recorded the $2.8 million fair value of the warrants in additional paid-in capital on the issuance date. As the warrants are classified in equity, remeasurement is not required unless reclassification from equity is required. The warrant contract is reassessed at each balance sheet date for the appropriate classification. |