Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2023

Note 12. Fair value of financial instruments

Recurring Fair Value Measurements

The fair value hierarchy table for the periods indicated is as follows:


	Fair value measurement on a recurring basis at reporting date using (1)
(In thousands)	Level 1		Level 2		Level 3		Total
Balance at March 31, 2023
Senior Secured Convertible Note (2), related party	$	—	$	—	$	3,717	$	3,717
Senior Secured Convertible Note (3), related party		—		—		5,725		5,725
Senior Secured Convertible Note (4)		—		—		1,660		1,660
Warrant liability		—		—		734		734
Total liabilities measured at fair value	$	—	$	—	$	11,836	$	11,836
Balance at December 31, 2022
Senior Secured Convertible Note (2), related party	$	—	$	—	$	3,940	$	3,940
Senior Secured Convertible Note (3), related party		—		—		6,068		6,068
Total liabilities measured at fair value	$	—	$	—	$	10,008	$	10,008

1 There were no transfers between the respective Levels during the three month period ended March 31, 2023 and the year ended December 21, 2022.

The Company assesses the inputs used to measure fair value using the three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market. For investments where little or no public market exists, management’s determination of fair value is based on the best available information which may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration various factors including earnings history, financial condition, recent sales prices of the issuer’s securities and liquidity risks.

Below are the changes to level 3 measured liabilities:


	Level 3 measured
	liabilities
Fair value at December 31, 2022	$	10,008
Fair value of senior secured convertible notes issued		1,803
Fair value of warrants issued with senior secured convertible notes		1,530
Change in fair value		(1,505	)
Fair value at March 31, 2023	$	11,836

- 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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