Fair Value Measurements

6 Months Ended

Jun. 30, 2024

Fair Value Measurements

Fair Value Measurements

3. Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, describes the 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.

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 at the measurement date. Assets and liabilities that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the

use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

● Level 1 — Quoted prices in active markets for identical assets or liabilities. The Company’s Level 1 assets consist of cash and cash equivalents. The Company has no Level 1 liabilities.

● Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities. The Company has no Level 2 assets or liabilities.

● Level 3 — Unobservable inputs that are supported by little or no market data and which require internal development of assumptions about how market participants price the fair value of the assets or liabilities. The Company has no Level 3 assets. Level 3 liabilities consist of warrant liability.

The following table sets forth the Company’s financial instruments measured at fair value by level within the fair value hierarchy as of June 30, 2024 and December 31, 2023 (in thousands):

	Level 1		Level 2		Level 3
June 30, 2024
Assets:
Cash and cash equivalents	$	2,848	$	—	$	—
Total assets at fair value	$	2,848	$	—	$	—
Liabilities:
Warrant Liability	$	—	$	—	$	10,647
Total assets at fair value	$	—	$	—	$	10,647

	Level 1		Level 2		Level 3
December 31, 2023
Assets:
Cash and cash equivalents	$	2,557	$	—	$	—
Total assets at fair value	$	2,557	$	—	$	—
Liabilities:
Warrant Liability	$	—	$	—	$	5,696
Total assets at fair value	$	—	$	—	$	5,696

The fair value of the warrant liability as of June 30, 2024 was calculated using a probability-weighted model incorporating the probability of completion of the Merger, the terms included in the cash-out acknowledgment and cancellation agreements described in Note 10 and the option pricing model. The significant assumptions used in preparing the option pricing model for valuing the Company’s warrants as of June 30, 2024 include (i) volatility 105.3% - 433.0%, (ii) risk-free interest rate 4.3% - 4.7%, (iii) strike price for the common warrants of $1.00, $1.56, $2.09, $3.69, $4.94 and $45.00, (iv) fair value of common stock of $0.33 and $1.52 and (v) expected life 1.2 – 4.9 years. The significant assumptions used in preparing the option pricing model for valuing the Company’s warrants as of December 31, 2023 include (i) volatility 101.5% - 126.0%, (ii) risk-free interest rate 3.8% - 4.0%, (iii) strike price for the common warrants $3.69, $45.00 and $1,700, (iv) fair value of common stock of $1.95 and (v) expected life 2.8 – 4.4 years.

The following is a roll forward of the fair value of Level 3 warrants:

Beginning balance at December 31, 2023	$	5,696
Warrants issued		3,888
Warrants exercised		(3,480)
Change in fair value		4,543
Ending balance June 30, 2024	$	10,647

There were no transfers between Level 1, 2 or 3 during the six months ended June 30, 2024 or 2023.