Fair Value Measurements

9 Months Ended

Sep. 30, 2023

The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value (in thousands):


	Level	September 30, 2023		December 31, 2022
Liabilities:
Warrant liability – Public Warrants	1	$	1,750	$	1,250
Warrant liability – Private Placement Warrants	3	1,120		840
Total warrant liability		$	2,870	$	2,090

The following tables summarize the changes in the fair value of the warrant liabilities (in thousands):


	Three Months Ended September 30, 2023						Nine Months Ended September 30, 2023
	Public Warrants		Private Placement Warrants		Warrant Liabilities		Public Warrants		Private Warrants		Warrant Liabilities
Fair value, beginning of period	$	1,500	$	910	$	2,410	$	1,250	$	840	$	2,090
Change in fair value	250		210		460		500		280		780
Fair value, end of period	$	1,750	$	1,120	$	2,870	$	1,750	$	1,120	$	2,870


	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	Public Warrants		Private Placement Warrants		Warrant Liabilities		Public Warrants		Private Warrants		Warrant Liabilities
Fair value, beginning of period	$	8,125	$	5,320	$	13,445	$	16,750	$	10,710	$	27,460
Change in fair value	(4,000)		(2,590)		(6,590)		(12,625)		(7,980)		(20,605)
Fair value, end of period	$	4,125	$	2,730	$	6,855	$	4,125	$	2,730	$	6,855

Public Warrants

The Company determined the fair value of the Public Warrants, based on the publicly listed trading price of such warrants as of the valuation date. Accordingly, the Public Warrants are classified as Level 1 financial instruments. The fair value of the Public Warrants was $1.8 million and $1.3 million as of September 30, 2023 and December 31, 2022, respectively.

Private Placement Warrants

The estimated fair value of the Private Placement Warrants is determined with Level 3 inputs using the Black-Scholes model. The significant inputs and assumptions in this method are the stock price, exercise price, volatility, risk-free rate, and term or maturity. The underlying stock price input is the closing stock price as of each valuation date and the exercise price is the price as stated in the warrant agreement. The volatility input was determined using the historical volatility of comparable publicly traded companies which operate in a similar industry or compete directly against the Company. Volatility for each comparable publicly traded company is calculated as the annualized standard deviation of daily continuously compounded returns. The Black-Scholes analysis is performed in a risk-neutral framework, which requires a risk-free rate assumption based upon constant-maturity treasury yields, which are interpolated based on the remaining term of the Private Placement Warrants as of each valuation date. The term/maturity is the duration between each valuation date and the maturity date, which is five years following the date the Business Combination closed, or June 16, 2026.

The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:


	September 30, 2023			December 31, 2022
Exercise price	$	11.50		$	11.50
Stock price	$	1.32		$	1.01
Volatility	88.0		%	82.3		%
Term (years)	2.71			3.46
Risk-free interest rate	4.87		%	4.17		%

Significant changes in the volatility would result in a significant lower or higher fair value measurement, respectively.

The fair value of the Private Placement Warrants was $1.1 million and $0.8 million as of September 30, 2023 and December 31, 2022, respectively.

There were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

- 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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