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FAIR VALUE MEASUREMENTS
 12 Months Ended
Dec. 31, 2023
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

NOTE 5 – FAIR VALUE MEASUREMENTS

 

The Company calculates the fair value of the Company’s assets and liabilities that qualify as financial instruments and includes additional information in the notes to the consolidated financial statements when the fair value is different than the carrying value of these financial instruments. The estimated fair value of other receivables, prepaid expenses and other current assets, other assets, accounts payable, accrued expenses, and payables to licensor approximate their carrying amounts due to the relatively short maturity of these instruments.

 

U.S. GAAP 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 at the measurement date. This guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

 

  ● Level 1 - Quoted prices in active markets for identical assets or liabilities.
     
  ● Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
     
  ● Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar valuation techniques that use significant unobservable inputs.

 

The Company has segregated all financial assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below.

 

The following table provides a summary of financial assets measured at fair value on a recurring and non-recurring basis (in thousands):

 

Description  Fair Value at December 31, 2023   Level 1   Level 2   Level 3 
                 
Recurring Assets                    
Cash equivalents                    
Money market fund  $1,034   $1,034   $—   $— 
Short-term investments                    
U.S. treasury securities   8,393    8,393    —    — 
U.S. federal agency securities   29,360    —    29,360    — 
Total assets measured at fair value  $38,787   $9,427   $29,360   $— 
                     
Liabilities                    
Payable to licensor  $4,580   $—   $—   $4,580 
Warrant liabilities   31,352    —    —    31,352 
Total liabilities measured at fair value  $35,932   $—   $—   $35,932 

 

 

Description  Fair Value at December 31, 2022   Level 1   Level 2   Level 3 
                 
Recurring Assets                    
Cash equivalents                    
Money market fund  $12,923   $12,923   $—   $— 
Short-term investments                    
U.S. treasury and federal agency securities   37,932    —    37,932    — 
Total assets measured at fair value  $50,855   $12,923   $37,932   $— 
                     
Liabilities                    
Warrant liabilities  $19,657   $—   $—   $19,657 
Total liabilities measured at fair value  $19,657   $—   $—   $19,657 

 

Warrant Liabilities

 

As of December 31, 2023 and 2022, the Company had outstanding warrant liabilities related to the 2022 private placement that allow the holders to purchase 7,609,879 shares of common stock at an exercise price of $4.75 per share. The expiration date for these warrant liabilities is November 2027. As of December 31, 2023 and 2022, the Company had outstanding warrant liabilities related to the 2021 public offering that allow the holders to purchase 1,788,000 shares of common stock at an exercise price of $9.75 per share. The expiration date for these warrant liabilities is December 2026. The common stock warrants are not indexed to the Company’s own stock and therefore have been classified as liabilities at their estimated fair value. Changes in the estimated fair value of the warrant liabilities is recorded as changes in fair value of warrant liabilities in the consolidated statement of operations and comprehensive loss.

 

The following table provides a summary of the activity on the warrant liabilities (in thousands):

 

   2023   2022 
   As of December 31, 
   2023   2022 
         
Beginning warrant liabilities  $19,657   $9,007 
Fair value of warrants issued in connection with private offering   —    22,034 
Loss (gain) recognized in earnings from change in fair value   11,695    (11,384)
Ending warrant liabilities  $31,352   $19,657 

 

The warrant liabilities are valued using significant inputs not observable in the market. Accordingly, the warrant liability is measured at fair value on a recurring basis using unobservable inputs and are classified as Level 3 inputs within the fair value hierarchy. Fair value measurements categorized within Level 3 are sensitive to changes in the assumptions or methodology used to determine fair value and such changes could result in a significant increase or decrease in the fair value. The Company’s valuation of the common stock warrants utilized the Black-Scholes option-pricing model, which incorporated assumptions and estimates to value the common stock warrants. The Company assessed these assumptions and estimates at the end of each reporting period.

 

 

Assumptions used to estimate the fair value of the warrants in the Black-Scholes option-pricing model are as follows:

 

   As of December 31, 
   2023   2022 
         
Common share price   $5.01    $1.72 – $2.18 
Expected term (years)   2.96 – 3.84    3.96 – 4.84 
Risk-free interest rate (%)   3.84% – 3.92%   3.91% – 4.01%
Volatility (%)   100%   102.40% – 107.55%
Expected dividend yield (%)   0%   0%