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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2023

We estimate the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate. As of December 31, 2023 and 2022, the fair values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued expenses approximate their carrying values due to the short-term nature of these instruments. Additionally, the fair values of short-term and long-term debt instruments approximate their carrying values.

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. Fair value measurements are categorized into one of three levels of the fair value hierarchy based on the lowest level of significant input used. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Considerable judgment and a high degree of subjectivity are involved in developing these estimates. These estimates may differ from the actual amounts that we could realize upon settlement.

The fair value hierarchy is as follows:

Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2 - Other observable inputs, either directly or indirectly, other than quoted prices included in Level 1, including:

•Quoted prices for similar assets/liabilities in active markets;

•Quoted prices for identical or similar assets/liabilities in non-active markets (e.g., few transactions, limited information, non-current prices, high variability over time);

•Inputs other than quoted prices that are observable for the asset/liability (e.g., interest rates, yield curves, volatilities, default rates); and

•Inputs that are derived principally from or corroborated by other observable market data.

Level 3 - Unobservable inputs that cannot be corroborated by observable market data.

The following tables present information about our financial assets and liabilities measured at fair value on are recurring basis:


	December 31, 2023
(In thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
Derivative liability	$	—	$	—	$	59	$	59
Warrant liability	—		17		—		17
	$	—	$	17	$	59	$	76


	December 31, 2022
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents - money market funds	$	1,681	$	—	$	—	$	1,681
	$	1,681	$	—	$	—	$	1,681
Liabilities:
Derivative liability	$	—	$	—	$	56	$	56
Warrant liability	—		9		—		9
	$	—	$	9	$	56	$	65

Money Market Funds

As of December 31, 2023, we had no cash equivalents. As of December 31, 2022, our cash equivalents consisted of money market funds which were classified as Level 1. We used observable prices in active markets in determining the classification of our money market funds as Level 1. There were no transfers between the hierarchy levels during the year ended December 31, 2023 or 2022.

The fair value and amortized cost of our cash equivalents - money market funds were both zero as of December 31, 2023.

Cash equivalents as of December 31, 2022 were as follows:


	December 31, 2022
(In thousands)	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value
Cash equivalents:
Money market funds	$	1,681	$	—	$	—	$	1,681
	$	1,681	$	—	$	—	$	1,681

Derivative Liability

In accounting for the 2026 Notes, we bifurcated and accounted for the conversion option as a derivative measured at fair value on the issuance date in accordance with ASC 815, Derivatives and Hedging. As of December 31, 2023 and 2022, the fair value of the derivative was $0.1 million and $0.1 million, respectively, all of which were included in other liabilities, noncurrent, in the consolidated balance sheets. See Note 10, Debt, for further information. Total other income for the years ended December 31, 2023 and 2022, included a $3.0 thousand loss on the fair value of derivative liability and a $7.5 million gain on the fair value of the derivative liability, respectively.

The fair value of the derivative liability is considered a Level 3 valuation and is determined using a Binomial Lattice Option Pricing Model. The significant assumptions used in the model were:


	December 31, 2023	December 31, 2022
Stock price	$1.90	$1.63
Volatility	100.0%	95.0%
Risk free rate	4.51%	4.17%
Exercise price	$106.50	$106.50
Expected life (in years)	2.95	3.44
Conversion periods	5 months-3 years	2 years-4 years
Future share price	$5.90-$594.30	$0.10-$405.60

The change in the fair value of the Level 3 derivative liability for the years ended December 31, 2023 and 2022 are as follows:


(In thousands)	December 31, 2023		December 31, 2022
Fair value, beginning of period	$	56	$	7,977
Settlement	—		(392)
Change in fair value	3		(7,529)
Fair value, end of period	$	59	$	56

The settlement is included in loss on extinguishment of debt in the consolidated statement of operations.

2021 Private Placement Warrants and 2021 PIPE Warrants

We have classified the 2021 Private Placement Warrants and 2021 PIPE Warrants (the “2021 Private Placement Warrants”) and the 2021 PIPE Warrants (the “2021 PIPE Warrants”) as liabilities at fair value, due to their redemption characteristics, with subsequent changes in their fair values to be recognized in the consolidated financial statements at each reporting date. See Note 12, Capital Structure, for further information. As of December 31, 2023, the fair value of the 2021 Private Placement Warrants and the 2021 PIPE Warrants was determined to be $0.02 per warrant, totaling $11 thousand and $6 thousand, respectively, and are included in warrant liabilities in the consolidated balance sheets. As of December 31, 2022, the fair value of the 2021 Private Placement Warrants and the 2021 PIPE Warrants was determined to be $0.01 per warrant, totaling $6 thousand and $3 thousand respectively, and are included in warrant liabilities in the consolidated balance sheets.

Gain or loss due to the fair value changes in the 2021 Private Placement Warrants and the 2021 PIPE Warrants, both of which are included in other income, net in our consolidated statements of operations, consisted of the following:


(In thousands)	For the year ended December 31,
	2023		2022
Gain (loss) on fair value of Private Placement warrant liabilities	$	(5)	$	158
Gain (loss) on fair value of PIPE warrant liabilities	(3)		84
	$	(8)	$	242

The fair value of the Private Placement Warrants and PIPE Warrants is considered a Level 2 valuation as we have derived their value by using quoted market prices. The transfer of the Private Placement Warrants and PIPE Warrants to anyone other than the purchasers or their permitted transferees, would result in these Private Placement Warrants and PIPE Warrants having substantially the same terms as the Public Warrants, which are traded in active markets.

There were no transfers between fair value levels during the years ended December 31, 2023 or 2022.

- 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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