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Fair Value Measurements
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements
12.
Fair Value Measurements

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their respective fair values due to the short-term nature of such instruments.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period, pursuant to the policy described in Note 2.

This determination requires significant judgments to be made. The following table summarizes the conclusions reached as of December 31, 2024 and 2023 for financial instruments measured at fair value on a recurring basis (in thousands):

 

 

 

 

 

 

Fair Value Hierarchy Classification

 

 

 

Balance

 

 

Quoted Prices in Active
Markets for Identical Assets (Level 1)

 

 

Significant Other
Observable Inputs (Level 2)

 

 

Significant Unobservable Inputs (Level 3)

 

December 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

3,441

 

 

$

3,441

 

 

 

—

 

 

 

—

 

Restricted cash

 

 

544

 

 

 

544

 

 

 

—

 

 

 

—

 

Money market funds

 

 

12,610

 

 

 

12,610

 

 

 

—

 

 

 

—

 

Total assets

 

$

16,595

 

 

$

16,595

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$

7,998

 

 

 

—

 

 

 

—

 

 

$

7,998

 

Total liabilities

 

$

7,998

 

 

 

—

 

 

 

—

 

 

$

7,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

767

 

 

$

767

 

 

 

—

 

 

 

—

 

Restricted cash

 

 

543

 

 

 

543

 

 

 

—

 

 

 

—

 

Money market funds

 

 

33,283

 

 

 

33,283

 

 

 

—

 

 

 

—

 

Total assets

 

$

34,593

 

 

$

34,593

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$

21,810

 

 

 

—

 

 

 

—

 

 

$

21,810

 

Derivative liability

 

 

196

 

 

 

—

 

 

 

—

 

 

 

196

 

Total liabilities

 

$

22,006

 

 

 

—

 

 

 

—

 

 

$

22,006

 

 

The Company measures cash equivalents at fair value on a recurring basis. The fair value of cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. As of December 31, 2024, the cash and cash equivalents of $16.1 million and the restricted cash balances of $0.4 million and $0.1 million within short and long term on the balance sheet, respectively, sum to the total of $16.6 million as shown in the statement of cash flows. As of December 31, 2023, the cash and cash equivalents of $34.1 million and the restricted cash balances of $0.4 million and $0.2 million within short and long term on the balance sheet, respectively, sum to the total of $34.6 million as shown in the statement of cash flows.

Level 3 financial liabilities consist of the warrant liabilities for which there is no current market such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The Company uses the Black-Scholes option valuation model to value the Level 3 warrant liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility. The unobservable input for all of the Level 3 warrant liabilities includes volatility. The historical and implied volatility of the Company, using its closing common stock prices and market data, is utilized to reflect future volatility over the expected term of the warrants. At December 31, 2024, the Level 3 volatility utilized in the Black-Scholes model to fair value the warrant liability was 83.4%. At December 31, 2023, the range and weighted average of the Level 3 volatilities utilized in the Black-Scholes model to fair value the warrant liabilities were 87.2% to 91.0% and 87.2%, respectively.

The Company uses the binomial lattice valuation model to value the Level 3 derivative liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, dividend yield, risk-free rate, historical volatility, credit rating, market credit spread, and estimated effective yield. The unobservable inputs associated with the Level 3 derivative liability are adjusted equity volatility, market credit spread, and estimated yield. As of December 31, 2023, these inputs were 99.6%, 1,159 basis points, and 16.3%, respectively. The senior convertible notes are initially fair valued using the binomial lattice model and with the straight debt fair value calculated using the discounted cash flow method. The residual difference represents the fair value of the embedded derivative liability and the fair value of the embedded derivative liabilities are reassessed using the binomial lattice valuation model on a quarterly basis.

A reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows (in thousands):

 

 

 

 

Warrant Liabilities

 

Balance – January 1, 2024

 

 

$

21,810

 

Gain adjustment to fair value

 

 

 

(13,812

)

Balance – December 31, 2024

 

 

$

7,998

 

 

 

 

 

 

 

 

 

Derivative Liability

 

Balance – January 1, 2024

 

 

$

196

 

Gain adjustment to fair value

 

 

 

(196

)

Balance – December 31, 2024

 

 

$

—