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Fair Value Measurement

3 Months Ended

Mar. 31, 2024

Fair Value Measurement

Fair Value Measurement

NOTE 3: Fair Value Measurement

The Company determines the fair market values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following are three levels of inputs that may be used to measure fair value:

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Level 1 – Quoted prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

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Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The valuation of Level 3 investments requires the use of significant management judgments or estimation.

In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3. Level 3 liabilities that are measured at fair value on a recurring basis consist of the convertible preferred stock warrant liabilities. The inputs used in estimating the fair value of the warrant liabilities are described in Note 6 -- Capital Stock and Warrants.

The following tables summarize, for each category of assets or liabilities carried at fair value, the respective fair value as of March 31, 2024 and December 31, 2023, and the classification by level of input within the fair value hierarchy:


		Total			Level 1			Level 2			Level 3
March 31, 2024
Assets
Cash equivalents:
Money market funds		$	1,107		$	1,107		$	—		$	—
Liabilities
Warrant liability – Series m-3 Preferred Stock		$	212		$	—		$	—		$	212
Warrant liability – Series S Preferred Stock		$	5,086		$	—		$	—		$	5,086
Derivative liability – Class A Common Stock warrants		$	179		$	—		$	—		$	179


		Total			Level 1			Level 2			Level 3
December 31, 2023
Assets
Cash equivalents:
Money market funds		$	1,104		$	1,104		$	—		$	—
Liabilities
Warrant liability – Series m-3 Preferred Stock		$	284		$	—		$	—		$	284
Warrant liability – Series s Preferred Stock		$	5,692		$	—		$	—		$	5,692
Derivative liability – Class A Common Stock warrants		$	271		$	—		$	—		$	271

During the three-month periods ended March 31, 2024 and 2023, there were no transfers between Level 1, Level 2, or Level 3 assets or liabilities reported at fair value on a recurring basis and the valuation techniques used did not change compared to the Company’s established practice.

The following table sets forth a summary of the changes in the fair value of Company’s Level 3 warrant and derivative liabilities during the three-month periods ended March 31, 2024 and 2023, which were measured at fair value on a recurring basis:


		March 31,			March 31,
		2024			2023
Beginning Balance		$	6,247		$	11,157
Revaluation of Series m-3, S Preferred Stock warrants and derivative liability			(770)			(4,622)
Ending Balance		$	5,477		$	6,535

The following table sets forth a summary of the changes in the fair value of Company’s Level 3 convertible note liabilities during the three-month periods ended March 31, 2024 and 2023, which were measured at fair value on a recurring basis:


		March 31,			March 31,
		2024			2023
Beginning Balance		$	—		$	8,152
Notes converted			—			(4,174)
Interest accretion			—			497
Revaluation of 2022 Convertible Notes			—			(43)
Ending Balance		$	—		$	4,432

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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