ASC 820, Fair Value Measurement, establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

ASC 820 identifies fair value as the exchange price, or 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 a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes among the following:

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The following table presents fair value of the Company’s cash, cash equivalents, restricted cash and warrant liability as of March 31, 2023 and December 31, 2022 (in thousands):



	March 31,		Quoted Prices in Active Markets		Significant Other Observable Inputs		Unobservable Inputs
Description:	2023		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash	$	841	$	841	$	—	$	—
Money Market Funds		26,595		26,595		—		—
Restricted Cash		1,968		1,968		—		—
Total assets measured and recorded at fair value	$	29,404	$	29,404	$	—	$	—
Liabilities:
Warrant Liability		1,449		—		—		1,449
Total liabilities measured and recorded at fair value	$	1,449	$	—	$	—	$	1,449



	December 31,		Quoted Prices in Active Markets		Significant Other Observable Inputs		Unobservable Inputs
Description:	2022		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash	$	9,651	$	9,651	$	—	$	—
Money Market Funds		28,669		28,669		—		—
Restricted Cash		1,960		1,960		—		—
Total assets measured and recorded at fair value	$	40,280	$	40,280	$	—	$	—
Liabilities:
Warrant Liability		5,483		—		—		5,483
Total liabilities measured and recorded at fair value	$	5,483	$	—	$	—	$	5,483

(1)	The fair value of Level 1 securities is estimated based on quoted prices in active markets for identical assets or liabilities.

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers between Level 2 and Level 3 during the three months ended March 31, 2023.

The common stock warrants issued in connection with the Company’s equity raises in July 2022 and November 2022 were classified as liabilities at the time of issuance due to certain cash settlement adjustment features that were not deemed to be indexed to the Company’s stock. The warrant liability is remeasured each reporting period with the change in fair value recorded to other income (expense) in the consolidated statement of operations and comprehensive loss until the warrants are exercised, expired, reclassified or otherwise settled. The fair value of the pre-funded warrant liability is equal to its intrinsic value due to the nominal exercise price. The fair value of the warrant liability was estimated using a Black-Scholes Option Pricing Model.

Registered Direct Stock Offering and Concurrent Warrant Issuance

The fair value of the July Offering Common Stock Warrant liability was determined using Level 3 inputs and was estimated using the Black-Scholes valuation model. The assumptions used to estimate the fair value were as follows:


	March 31		December 31,
	2023		2022
Expected term of warrants (in years)	4.3		4.6
Risk-free interest rate	3.7	%	4.0	%
Expected volatility	94.4	%	108.9	%
Dividend yield	—	%	—	%

The following is a roll forward of the July Offering Common Stock Warrant liability (in thousands):


Balance, December 31, 2022	$	259
Change in fair value		(191)
Balance, March 31, 2023	$	68

November 2022 Equity Offering and Warrant Issuance

Due to the nominal exercise price of the pre-funded warrants, the fair value is equal to the intrinsic value. The fair value of the November Offering Common Stock Warrant liability was determined using Level 3 inputs and was estimated using the Black-Scholes valuation model. The assumptions used to estimate the fair value were as follows:



	March 31, 2023			December 31, 2022
Expected term of warrants (in years)		4.6			4.9
Risk-free interest rate		3.6	%		4.0	%
Expected volatility		100.2	%		106.1	%
Dividend yield		—	%		—	%

The following is a roll forward of the November Offering Common Stock Warrant liability (in thousands):


	Warrant Liability
Balance, December 31, 2022	$	5,224
Change in fair value		(2,275)
Exercise of pre-funded common stock warrants		(1,568)
Balance, March 31, 2023	$	1,381

Warrants

As of March 31, 2023, the Company had the following common stock warrants outstanding:



	Classification	Warrants	Exercise Price	Expiration Date
July 2022 Offering	Liability	320,000	$6.58	12/28/2027
November 2022 Offering (Pre-funded warrants)	Liability	619,000	0.001	Until exercised
November 2022 Offering	Liability	2,614,380	2.95	11/18/2027
R-Bridge warrants	Equity	200,000	20.50	4/14/2025
Other warrants	Equity	11,014	31.25 - 265.48	1/29/24 - 3/31/27
		3,764,394

The Company classifies investments available to fund current operations as current assets on its balance sheet. As of March 31, 2023 and 2022, the Company did not hold any investment securities exceeding a one-year maturity.

Accretion of bond discount on marketable securities is included in other income as a separate component of other income (expense) on the statement of operations and comprehensive loss. Interest income on marketable securities is recorded as interest income on the statement of operations and comprehensive loss.