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Fair Value Measurements

3 Months Ended

Mar. 31, 2024

The carrying amounts of the Company’s financial instruments, including cash, restricted cash, and accounts payable, approximate fair value due to the short-term nature of those instruments.

Rights from Private Placement

The Company determined that the rights from Private Placement is a derivative asset, which requires the asset to be accounted for at fair value. The fair value was determined using a Monte Carlo simulation based on the contractual funding date at the measurement date, minimum contractual purchase price of $3.18 and historical stock prices. As of March 31, 2024, the Company did not expect the second closing of the Private Placement to occur and as a result, the Company deemed the fair value of the rights from Private Placement to be zero. The Company recorded a loss in the fair value of Private Placement of $3.8 million for the three months ended March 31, 2024, which is recorded in other income (expense) in the Statement of Operations. The fair value measurement as of March 31, 2023 was approximately $2.3 million and there was no change in fair value for the three months ended March 31, 2023.

The following table provides a summary of the changes in the fair value of the rights from Private Placement measured using Level 3 inputs:


	Three Months Ended March 31,
	2024			2023
	(in thousands)
Balance at beginning of period	$	3,832		$	2,250
Change in fair value of rights from Private Placement		(3,832	)		—
Balance at end of period	$	—		$	2,250

2020 Note

The Company elected the fair value option to account for the 2020 note (see Note 5).

The Company did not obtain an independent valuation of the 2020 note as it matures on July 31, 2024 and the fair value approximates the principal amount.

The significant unobservable inputs used in the fair value measurement of the 2020 note for the three months ended March 31, 2023 were as follows: discount rate of 15.0% and contractual payment date of 1.3 years, which resulted in a fair value of the 2020 note of $225,000.

The following table provides a summary of the changes in the fair value of the 2020 notes payable measured using Level 3 inputs:


	Three Months Ended March 31,
	2024		2023
	(in thousands)
Balance at beginning of period	$	241	$	219
Change in fair value of 2020 notes		9		6
Balance at end of period	$	250	$	225

- 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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