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Note 3 - Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 3. FAIR VALUE MEASUREMENTS

The Company’s cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of investments that are generally classified within Level 1 of the fair value hierarchy include money market securities and certificates of deposit.

As a result of certain call and put options within the Convertible Notes entered into in April 2023, the Company recorded a combined embedded derivative liability on its consolidated balance sheet with a corresponding debt discount which is netted against the face value of the Convertible Notes. The fair value of the embedded derivative liability was classified within Level 2 of the fair value hierarchy because the stock price used in the related Black Sholes valuation model is adjusted for the dilutive effect of the 2023 Private Placement. This price was also used in the fair value models used by the Company to value the 2023 Warrants issued in conjunction with the 2023 Private Placement as well as in accounting for the warrant amendment and preferred stock conversion price adjustments that resulted from the 2023 Private Placement. This price is based on observable inputs but is not a quoted price in an active market and involves uncertainties. If factors or assumptions utilized in determining this price change, the estimated fair values for which it was used could be materially different. See Notes 9, “Convertible Note”; 11, “Warrant Liability”; and Note 12, “Stockholder’s Equity” for further discussion of related fair value calculations.

The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of September 30, 2023 (in thousands):

						Fair Value Measurements Using
						Quoted
						Prices in
						Active				Significant
						Markets				Other				Significant
		*Balance at*				*for Identical*				*Observable*				*Unobservable*
		*September 30,*				*Items*				*Inputs*				*Inputs*
		*2023*				*(Level 1)*				*(Level 2)*				*(Level 3)*
Assets
Restricted cash held as a certificate of deposit		$	324			$	324			$	—			$	—
Deposit held as a certificate of deposit			152				152				—				—
Total assets		$	476			$	476			$	—			$	—

The following table presents the Company’s cash equivalent assets measured at fair value on a recurring basis as of December 31, 2022 (in thousands):

						Fair Value Measurements Using
						Quoted
						Prices in
						Active				Significant
						Markets				Other				Significant
		*Balance at*				*for Identical*				*Observable*				*Unobservable*
		*December 31,*				*Items*				*Inputs*				*Inputs*
		*2022*				*(Level 1)*				*(Level 2)*				*(Level 3)*
Assets
Restricted cash held as a certificate of deposit		$	332			$	332			$	—			$	—
Deposit held as a certificate of deposit			152				152				—				—
Total assets		$	484			$	484			$	—			$	—

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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