Note 2 - Fair Value Measurements 1

6 Months Ended

12 Months Ended

Jun. 30, 2024

Dec. 31, 2023

Notes to Financial Statements

Fair Value Disclosures [Text Block]

2. FAIR VALUE MEASUREMENTS

The fair value of the Company’s financial assets and liabilities is determined in accordance with the fair value hierarchy established in FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy of ASC 820 requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs, other than Level 1 inputs, which are observable either directly or indirectly or can be corroborated by observable market data using quoted prices for similar assets or liabilities.

Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company's financial instruments that are not remeasured at fair value include accounts receivable, prepaid and other current assets, accounts payable, accrued expenses, other current liabilities, and convertible note. The carrying values of these financial instruments approximate their fair values.

The Company’s financial assets and liabilities measured at fair value on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):

	Fair Value Measured as of June 30, 2024 Using:
	Adjusted Cost		Unrealized Losses			Fair Value		Cash and Cash Equivalent		Marketable Securities
Assets
Level 1
Money market funds	$	9,464	$	—		$	9,464	$	9,464	$	—
Level 2
Corporate bonds		10,062		(3	)		10,059		1,272		8,787
Commercial paper		6,135		(5	)		6,130		—		6,130
U.S. Government securities		1,857		—			1,857		—		1,857
Total financial assets	$	27,518	$	(8	)	$	27,510	$	10,736	$	16,774
Liabilities
Level 2
Private placement warrant liability	$	—	$	—		$	—	$	—	$	—
Level 3
Derivative warrant liability		—		—			39		—		—
Total financial liabilities	$	—	$	—		$	39	$	—	$	—

	Fair Value Measured as of December 31, 2023 Using:
	Adjusted Cost		Unrealized Gains		Fair Value		Cash and Cash Equivalent		Marketable Securities
Assets
Level 1
Money market funds	$	16,377	$	—	$	16,377	$	16,377	$	—
Level 2
Corporate bonds		2,880		1		2,881		—		2,881
Commercial paper		8,809		5		8,814		—		8,814
U.S. Government securities		7,892		4		7,896		—		7,896
Total financial assets	$	35,958	$	10	$	35,968	$	16,377	$	19,591
Liabilities
Level 2
Private placement warrant liability	$	—	$	—	$	—	$	—	$	—
Level 3
Derivative warrant liability		—		—		26		—		—
Total financial liabilities	$	—	$	—	$	26	$	—	$	—

The Company’s financial assets and liabilities subject to fair value procedures were comprised of the following:

Money Market Funds: The Company holds financial assets consisting of money market funds. These securities are valued using observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Marketable Securities: The Company holds financial assets consisting of fixed-income U.S. government agency securities, corporate bonds, and commercial paper. The securities are valued using prices from independent pricing services based on quoted prices of identical instruments in less active or inactive markets. Additionally, quoted prices of similar instruments in active market or industry models using data inputs such as interest rates and prices that can be directly observed or corroborated in active markets are used to value marketable securities.

Derivative Warrant Liability: On September 15, 2022, the Company entered into a convertible note agreement with a face value of $10,500 (the "2022 Note"). The Company’s derivative warrant liability includes the warrants that were issued by the Company as part of the 2022 Note. The warrants are recorded on the condensed consolidated balance sheets at fair value. The fair value is based on unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The fair value estimate of the warrants was based on a Monte-Carlo simulation model. Inherent in a Monte-Carlo simulation model are assumptions related to price, volatility, risk-free interest rate, term to expiration, and dividend yield. The price is based on the publicly traded price of the Company’s common stock as of the measurement date. The Company estimated the volatility for the warrants based on the historical and implied volatilities of the Company's publicly traded common stock. The risk-free interest rate is based on interpolated U.S. Treasury rates, commensurate with a similar term to the warrants. The term to expiration was calculated as the contractual term of the warrants of four years. Finally, the Company does not currently anticipate paying a dividend. Any changes in these assumptions can change the valuation significantly. Changes in fair value are recognized in other income (expense) for each reporting period. Derivative Warrant Liability is included within other noncurrent liabilities on the condensed consolidated balance sheets.

Private Placement Warrant Liability: The Private Placement Warrants are recorded on the condensed consolidated balance sheets at fair value. The fair value is based on observable Level 2 inputs, specifically, the observable input of the Company's public warrants, as terms of both warrants are substantially similar. Any changes in the fair value of the liability are reflected in other income (expense), net, on the condensed consolidated statements of operations and comprehensive loss. Private Placement Warrant liability is included within other noncurrent liabilities on the condensed consolidated balance sheets.

For the six months ended June 30, 2024, there were no net transfers between Level 1 and Level 2 inputs.

The following table presents a summary of the changes in fair value of the Company’s Level 3 financial instruments for the six months ended June 30, 2024 (in thousands):

	Derivative Warrant Liability
Balance at December 31, 2023	$	26
Additions		—
Change in fair value included in other income (expense), net		13
Balance at June 30, 2024	$	39

The key inputs into the Monte-Carlo simulation model for the derivative warrant liability valued at June 30, 2024 are as follows:

	June 30, 2024
Expected term (years)		2.2
Expected volatility		230.2	%
Risk-free interest rate		4.7	%
Dividend yield		—	%
Exercise price	$	105.00

If factors or assumptions change, the estimated fair values could be materially different. The value of the Company’s derivative warrant liability would increase if a higher risk-free interest rate was used and would decrease if a lower risk-free interest rate was used. Similarly, a higher volatility assumption would increase the value of the liability, and a lower volatility assumption would decrease the value of the liability.

2. FAIR VALUE MEASUREMENTS

The fair value of the Company’s financial assets and liabilities is determined in accordance with the fair value hierarchy established in FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy of ASC 820 requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs, other than Level 1 inputs, which are observable either directly or indirectly or can be corroborated by observable market data using quoted prices for similar assets or liabilities.

Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company's financial instruments that are not remeasured at fair value include accounts receivable, prepaid and other current assets, accounts payable, accrued expenses, and other current liabilities. The carrying values of these financial instruments approximate their fair values.

The Company’s financial assets and liabilities measured at fair value on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):

	Fair Value Measured as of December 31, 2023 Using:
	Adjusted Cost		Unrealized gains		Fair Value		Cash and Cash Equivalent		Marketable Securities
Assets
Level 1
Money market funds	$	16,377	$	—	$	16,377	$	16,377	$	—
Level 2
Corporate bonds		2,880		1		2,881		—		2,881
Commercial paper		8,809		5		8,814		—		8,814
U.S. Government securities		7,892		4		7,896		—		7,896
Total financial assets	$	35,958	$	10	$	35,968	$	16,377	$	19,591
Liabilities
Level 2
Private placement warrant liability	$	—	$	—	$	—	$	—	$	—
Level 3
Convertible notes		—		—		—		—		—
Derivative warrant liability		—		—		26		—		—
Total financial liabilities	$	—	$	—	$	26	$	—	$	—

	Fair Value Measured as of December 31, 2022 Using:
	Adjusted Cost		Unrealized losses			Fair Value		Cash and Cash Equivalent		Marketable Securities
Assets
Level 1
Money market funds	$	14,253	$	—		$	14,253	$	14,253	$	—
Level 2
Asset-backed securities		3,507		(119	)		3,388		—		3,388
Corporate bonds		22,139		(240	)		21,899		—		21,899
Commercial paper		20,760		—			20,760		—		20,760
U.S. Government securities		29,983		(895	)		29,088		—		29,088
Total financial assets	$	90,642	$	(1,254	)	$	89,388	$	14,253	$	75,135
Liabilities
Level 2
Private placement warrant liability	$	—	$	—		$	7	$	—	$	—
Level 3
Convertible notes		—		—			8,594		—		—
Derivative warrant liability		—		—			119		—		—
Total financial liabilities	$	—	$	—		$	8,720	$	—	$	—

The Company’s financial assets and liabilities subject to fair value procedures were comprised of the following:

Money Market Funds: The Company holds financial assets consisting of money market funds. These securities are valued using observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Marketable Securities: The Company holds financial assets consisting of fixed-income U.S. government agency securities, corporate bonds, commercial paper and asset-backed securities. The securities are valued using prices from independent pricing services based on quoted prices of identical instruments in less active or inactive markets. Additionally, quoted prices of similar instruments in active market or industry models using data inputs such as interest rates and prices that can be directly observed or corroborated in active markets are used to value marketable securities.

2022 Convertible Note: On September 15, 2022, the Company entered into a convertible note agreement with a face value of $10,500 (the "2022 Note"). The Company elected the fair value option to account for the 2022 Note. The fair value estimate of the 2022 Note was based on a binomial lattice model, which represents Level 3 measurements. Significant assumptions include the discount rate used in the model, remaining term, stock price, and volatility. The discount rate is derived from the estimated credit spread and the risk-free interest rate, which is based on interpolated U.S. Treasury rates, commensurate with a similar term to the 2022 Note. The remaining term is calculated based on the estimated maturity date of the 2022 Note. The stock price is based on the publicly traded price of the Company's common stock as of the measurement date. The Company estimated the volatility for the Note based on the historical and implied volatilities of the Company's publicly traded common stock. The changes in fair value are recognized in other income (expense), net for each reporting period. Refer to Note 10 for details of the terms and conditions of the 2022 Note.

Derivative Warrant Liability: The Company’s derivative warrant liability includes the warrants that were issued by the Company as part of the 2022 Note. The warrants are recorded on the consolidated balance sheets at fair value. The fair value is based on unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The fair value estimate of the warrants was based on a Monte-Carlo simulation model. Inherent in a Monte-Carlo simulation model are assumptions related to price, volatility, risk-free interest rate, term to expiration, and dividend yield. The price is based on the publicly traded price of the Company's common stock as of the measurement date. The Company estimated the volatility for the warrants based on the historical and implied volatilities of the Company's publicly traded common stock. The risk-free interest rate is based on interpolated U.S. Treasury rates, commensurate with a similar term to the warrants. The term to expiration was calculated as the contractual term of the warrants of 4 years. Finally, the Company does not currently anticipate paying a dividend. Any changes in these assumptions can change the valuation significantly. Changes in fair value are recognized in other income (expense) for each reporting period. Derivative Warrant Liability is included within other noncurrent liabilities on the consolidated balance sheets.

Private Placement Warrant Liability: The Private Placement Warrants are recorded on the consolidated balance sheets at fair value. The fair value is based on observable Level 2 inputs, specifically, the observable input of the Company's public warrants. Any changes in the fair value of the liability are reflected in other income (expense), net, on the consolidated statements of operations and comprehensive loss. Private Placement Warrant liability is included within other noncurrent liabilities on the consolidated balance sheets.

The Company measures certain nonfinancial assets at fair value on a nonrecurring basis, primarily property and equipment and ROU assets, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The fair value of the Company's property and equipment was based upon estimated salvage value or estimated orderly liquidation value, depending on the asset's highest and best use. As the fair value of property and equipment was estimated using primarily unobservable inputs, these are considered Level 3 fair value measurements. The fair value of the Company's headquarter ROU asset and associated leasehold improvements were based on a value-in-use approach utilizing market rent comparable information, and is considered a Level 2 fair value measurement. For more information regarding impairment charges, see Notes 1, 6, 7, and 17.

For the years ended December 31, 2023 and 2022, there were no transfers between Level 1 and Level 2 inputs.

The following table presents a summary of the changes in fair value of the Company’s Level 3 financial instruments for the year ended December 31, 2023 (in thousands):

	2022 Convertible Note			Derivative Warrant Liability			Total
Balance at December 31, 2022	$	8,594		$	119		$	8,713
Additions		—			—			—
Payments or conversions		(9,573	)		—			(9,573	)
Change in fair value included in other income (expense), net		958			(93	)		865
Change in fair value due to instrument specific credit risk included in other comprehensive income		21			—			21
Balance at December 31, 2023	$	—		$	26		$	26

The key inputs into the Monte-Carlo simulation model for the derivative warrant liability valued at December 31, 2023 are as follows:

	December 31, 2023
Expected term (years)		2.7
Expected volatility		155.7	%
Risk-free interest rate		4.1	%
Dividend yield		—	%
Exercise price	$	105.00

If factors or assumptions change, the estimated fair values could be materially different. The value of the Company’s derivative warrant liability would increase if a higher risk-free interest rate was used, and would decrease if a lower risk-free interest rate was used. Similarly, a higher volatility assumption would increase the value of the liability, and a lower volatility assumption would decrease the value of the liability.