Fair Value Measurements

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The following tables present the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	Fair Value Measurements as of December 31, 2023 Using:
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	81	$	—	$	—	$	81
Total assets	$	81	$	—	$	—	$	81
Warrant liabilities	$	—	$	—	$	546	$	546
Total liabilities	$	—	$	—	$	546	$	546

Money market funds are valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy.

As of June 30, 2024 and December 31, 2023, the Company held a restricted investment of $0 and $1,401, respectively, which represents a certificate of deposit that is classified as Level 2 in the fair value hierarchy.

Level 3 financial liabilities consist of the warrant liabilities for which there is no current market such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded through other income (expense). The Company uses a Monte-Carlo simulation model which includes the Black-Scholes option pricing model to value the Level 3 warrant liabilities at inception and on each subsequent reporting date. This model incorporates transaction details such as the Company’s stock

price, contractual terms of the underlying warrants, maturity, risk free rates, volatility, as well as the term to achievement of estimated sales targets. The unobservable inputs for all of the Level 3 warrant liabilities are volatility and the term to achievement of estimated sales targets. The Company utilizes its historical and implied volatility, using its closing common stock prices and market data, to reflect future volatility over the expected term of the warrants. The Company estimates the time to achievement of sales targets of VOWST using information and forecasts generated by the Company in consideration of the terms of the 2021 License Agreement. As of June 30, 2024, given the anticipated Transaction and expected repayment of the Oaktree Term Loan, the probability of drawing the Tranche B and C Loans that would trigger the issuance of these warrants was deemed to be remote. As a result, the fair value of the warrant liabilities at June 30, 2024 was deemed to be $0.

As of December 31, 2023, the Level 3 inputs to the warrant liabilities are as follows:

	December 31, 2023
Volatility		101.0	%
Term (in years)		1.3

A reconciliation of the beginning and ending balances for the six months ended June 30, 2024 for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows (in thousands):

	Warrant Liabilities
Balance as of December 31, 2023	$	546
Issuance of warrants		—
Adjustment to fair value		(546	)
Balance as of June 30, 2024	$	—

There were no assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2023. There were no transfers between Level 1, Level 2, or Level 3 during the three and six months ended June 30, 2024 and 2023.