XML 24 R9.htm IDEA: XBRL DOCUMENT

Note 3 - Fair Value Measurements

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 3. FAIR VALUE MEASUREMENTS

The following tables presents the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2023 and 2022 (in thousands):

Fair Value Measurements Using

Quoted

Prices in

Active

Markets

Significant

for

Other

Significant

Balance at

Identical

Observable

Unobservable

December

Items

Inputs

Inputs

31, 2023

(Level 1)

(Level 2)

(Level 3)

Assets

Restricted cash held as a certificate of deposit

$

476

$

476

$

—

$

—

Liabilities

Warrant liability

$

334

$

—

$

—

$

334

Fair Value Measurements Using

Quoted

Prices in

Active

Markets

Significant

for

Other

Significant

Balance at

Identical

Observable

Unobservable

December

Items

Inputs

Inputs

31, 2022

(Level 1)

(Level 2)

(Level 3)

Assets

Restricted cash held as a certificate of deposit

$

484

$

484

$

—

$

—

The Company’s cash equivalents and restricted cash held as certificates of deposit 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 Secured Convertible Notes (see Note 12, “Secured Convertible Notes”) are carried at proceeds, net of discounts, which management believes approximates fair value. As a result of certain call and put options within the Secured Convertible Notes, 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 Secured 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 Scholes valuation model (see subheading “Black Scholes Valuation Models and Assumptions” below) was adjusted for the dilutive effect of the 2023 Private Placement. The fair value of the May 2023 Warrants issued in conjunction with the 2023 Private Placement as well as the accounting for the warrant amendment and preferred stock conversion price adjustments that resulted from the 2023 Private Placement used the same stock price and were classified within Level 3.

The fair value of the December 2023 Warrants issued in conjunction with the 2023 Warrant Reprice Transaction as well as the accounting for the warrant amendment and preferred stock conversion price adjustments that resulted from the 2023 Warrant Reprice Transaction were classified within Level 3.

See Note 13, “Common Stock Warrants”, subheading “Summary of Common Stock Warrant Liabilities”, for a reconciliation of the beginning and ending balances for the warrant liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2023 and 2022.

Black Scholes Valuation Models and Assumptions

The Company utilizes a Black Scholes model for various valuations as outlined throughout this report. The following tables summarize the assumptions utilized for valuations impacting results for the years ended December 31, 2023 and 2022. See also Note 15, “Equity-Based Compensation” for related Black Scholes valuation assumptions.

Warrant Liabilities

Various of the Company’s warrants are subject to stockholder approval upon issuance or amendment and prior to exercise. The warrants are recorded as a liability at fair value upon issuance or amendment and continue to be recorded as a liability at fair value at each reporting date until stockholder approval occurs at which time they are transferred to stockholders’ equity at their fair value on the date of approval. Fair value was determined using a Black Scholes model as outlined below.

		November 2021 Warrants				November 2021 Warrants				July 2020, November 2021 & September 2022 Warrants						July 2020, November 2021 & September 2022 Warrants						May 2023 Warrants
Measurement event		Reporting date				Stockholder approval				Amendment and Issuance						Stockholder Approval						Issuance
Date		December 31, 2021				January 31. 2022				September 9, 2022						November 10, 2022						May 1, 2023
Total Value		9.6 million				7.5 million				5.2 million						1.9 million						1.6 million
Gain		not applicable				2.1 million				not applicable						3.4 million						not applicable

Assumptions:
Exercise price		$	18.55			$	18.55			$	6.30					$	6.30						1.30
Market price		$	13.18			$	10.50			$	6.29					$	2.80					$	0.72			(a)
Volatility			87	%			91	%			79.6			%			79.5			%			80.1			%
Risk-free rate			1.31	%			1.65	%			3.58	-	3.43	%			3.93	-	4.15	%			3.60	-	4.04	%
Dividend yield			0.0	%			0.0	%			0.0			%			0.0			%			0.0			%
Term (years)			6.0				6.0				3.4	-	6.0				3.2	–	5.8				2.1	-	5.1	%

		May 2023 Warrants						December 2023 Warrants				December 2023 Warrants
Measurement event		Stockholder Approval						Issuance				Reporting Date
Date		June 9, 2023						December 21, 2023				December 31, 2023
Total Value		$1.4 million						$0.4 million				$0.3 million
Gain		$0.2 million						not applicable				$56 thousand

Assumptions:
Exercise price		$	1.30					$	0.25			$	0.25
Market price		$	0.68					$	0.23			$	0.20
Volatility			77.6			%			79.3	%			79.3	%
Risk-free rate			3.92	–	4.59	%			3.88	%			3.85	%
Dividend yield			0.0			%			0.0	%			0.0	%
Term (years)			2.0	-	5.0				5.5				5.5

(a)

Adjusted for the dilutive effect of the 2023 Private Placement. See additional discussion above.

Warrant Modifications

Amendments to warrant terms are recorded as a non-cash gain (or loss) on modification of common stock warrants. The gain or loss represents the decrease or increase in the fair value of the amended warrants when comparing the value immediately before and after amendment using the Black-Scholes option pricing model. Fair value was determined using a Black Scholes model as outlined below.

		July 2020 & November 2021 Warrants
Measurement event		Prior to amendment						After amendment
Date		September 9, 2022						September 9, 2022
Total Value		$3.3 million						$5.2 million
Loss		not applicable						$1.9 million

Assumptions:
Exercise price		$	18.55 - 57.75					$	6.30
Market price		$	6.29					$	6.29
Volatility			79.6			%			79.6			%
Risk-free rate			3.43	-	3.58	%			3.43	-	3.58	%
Dividend yield			0.0			%			0.0			%
Term (years)			0.7	–	5.4				3.4	–	6.0

		July 2020, November 2021, September 2022 & November 2022 Warrants
Measurement event		Prior to amendment						After amendment
Date		April 27, 2023						April 27, 2023
Total Value		$0.3 million						$0.5 million
Loss		not applicable						$0.2 million

Assumptions:
Exercise price		$	6.30					$	1.50
Market price		$0.72				(a)		$0.72				(a)
Volatility			80.1			%			80.1			%
Risk-free rate			3.59	-	4.73	%			3.59	–	4.73	%
Dividend yield			0.0			%			0.0			%
Term (years)			1.1	–	5.6				1.1	–	5.6

		May 2023 Warrants
Measurement event		Prior to amendment						After amendment
Date		December 21, 2023						December 21, 2023
Total Value		$56 thousand						$0.2 million
Loss		not applicable						$0.1 million

Assumptions:
Exercise price		$	1.30					$	0.25
Market price		$	0.23					$	0.23
Volatility			79.3			%			79.3			%
Risk-free rate			3.92	–	4.62	%			3.92	–	4.62
Dividend yield			0.0			%			0.0			%
Term (years)			1.5	–	4.5				1.5	–	4.5

(a)

Adjusted for the dilutive effect of the 2023 Private Placement. See additional discussion above.

Preferred Stock Conversion Price Adjustments

Terms of the Company’s outstanding Preferred Stock include a Ratchet whereby the applicable conversion price may be adjusted (See Note 14, “Stockholders’ Equity”). When this occurs, the Company records a deemed dividend as a reduction to income available to common stockholders. In accordance with ASC 820, the deemed dividend is measured as the difference between (1) the fair value of the Preferred Stock immediately prior to the conversion price adjustment (but without the anti-dilution protection feature) and (2) the fair value of the Preferred Stock immediately after the conversion price adjustment (but without the anti-dilution protection feature). Fair value was determined using a Black Scholes model as outlined below.

		Series B								Series B & C
Measurement event		Prior to amendment				After amendment				Prior to amendment				After amendment
Date		September 9, 2022				September 9, 2022				April 27, 2023				April 27, 2023
Total value (b)		$6.9 million				$12.5 million				$9.6 million				$11.6 million
Deemed dividend		not applicable				$5.7 million				not applicable				$2.0 million

Assumptions:
Exercise price		$	14.00			$	6.30			$	6.30			$	1.30
Market price		$	6.29			$	6.29			$0.72		(a)		$0.72		(a)
Volatility			79.6	%			79.6	%			80.1	%			80.1	%
Risk-free rate			3.64	%			3.64	%			4.91	%			4.91	%
Dividend yield			0.0	%			0.0	%			0.0	%			0.0	%
Term (in years)			1.3				1.3				0.8				0.8

		Series B & C
Measurement event		Prior to amendment				After amendment
Date		December 21, 2023				December 21, 2023
Total value (b)		$1.7 million				$6.8 million
Deemed dividend		not applicable				$5.1 million

Assumptions:
Exercise price		$	1.30			$	0.25
Market price		$	0.23			$	0.23
Volatility			79.3	%			79.3	%
Risk-free rate			5.43	%			5.43	%
Dividend yield			0.0	%			0.0	%
Term (years)			0.3				0.3

(a)

Adjusted for the dilutive effect of the 2023 Private Placement. See additional discussion above.

(b)

Includes value of incremental shares underlying preferred stock and adjusted for probability of occurrence.

Bifurcatable Derivatives

Upon issuance in May 2023, the Secured Convertible Notes contained a lender’s conversion option which represented an embedded call option requiring bifurcation as an embedded derivative liability at fair value (see Note 12, “Secured Convertible Notes” for additional discussion). Fair value was determined using a Black Scholes model as outlined below.

		Secured Convertible Notes derivative				Secured Convertible Notes derivative
Measurement event		Issuance				Shareholder approval
Date		April 27, 2023				June 9, 2023
Total value (b)		$0.2 million				$0.2 million
Gain		not applicable				$40 thousand

Assumptions:
Exercise price		$	1.30			$	1.30
Market price		$	0.72	(a)		$	0.75
Volatility			80.1	%			76.9	%
Risk-free rate			4.88	%			5.41	%
Dividend yield			0.0	%			0.0	%
Term (years)			0.8				0.7

(a)

Adjusted for the dilutive effect of the 2023 Private Placement. See additional discussion above.

(b)

Adjusted for probability of occurrence.

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.

+ References + Details