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Fair Value of Financial Instruments
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

9) Fair Value of Financial Instruments

 

The Company issued approximately 343,000 warrants in connection with a private placement during the first quarter of 2022 (the “Q1-22 warrants”), which were determined to be classified as a liability. The Company also recorded the Market Cap Contingent Consideration liability related to the Exacis Acquisition. See Note 4 for more information related to the Exacis Acquisition.

 

In connection with the Bridge Notes, the Company recorded a derivative liability as of September 24, 2024. In connection with the Exchange Transactions, on September 24, 2024, the Company reclassified the Exchanged Warrants from equity to a liability. See Note 6 for more information related to the Bridge Notes and Exchange Transactions.

 

The Company uses a Black-Scholes option pricing model to estimate the fair value of the Q1-22 warrant liabilities and a Monte Carlo simulation model to estimate the fair value of the contingent consideration related to the Market Cap Contingent Consideration, both of which are considered a Level 3 fair value measurement.

 

The Company determined the fair value of the derivative liability by taking the difference between the fair value of the Bridge Notes with the conversion feature and without the conversion feature. Pursuant to the approval of the September 2024 Transactions by the Company’s stockholders at the Annual Meeting, the Bridge Notes were converted to shares of the Company’s common stock, and the outstanding principal and interest of the Bridge Notes as well as the derivative liability were reclassified to equity. As of December 31, 2024, there was no derivative liability balance.

 

The Company determined the fair value of the Exchanged Warrants as of September 24, 2024 by taking the number of shares of common stock issuable from the Exchanged Warrants multiplied by the closing stock price of $1.13 and reclassified approximately $11.2 million from equity to warrant liabilities.

 

The Company remeasures the fair value of the warrant liabilities, the Bridge Notes derivative liability and the Market Cap Contingent Consideration at each reporting period and changes in the fair values are recognized in the consolidated statement of operations.

 

The following tables summarize the liabilities that are measured at fair value as of December 31, 2024 and December 31, 2023 (in thousands):

 

Description  Level  December 31,
2024		   December 31,
2023		 
Liabilities:             
Warrant liabilities - Q1-22 warrants  3  $1   $116 
Market Cap Contingent Consideration  3  $41   $107 

 

Certain inputs used in Black-Scholes and Monte Carlo models may fluctuate in future periods based upon factors that are outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of the Company’s warrant liabilities or contingent consideration liabilities, which could also result in material non-cash gains or losses being reported in the Company’s condensed consolidated statement of operations.

 

 

The following table presents the changes in the liabilities measured at fair value from January 1, 2024 through December 31, 2024 (in thousands):

 

   Warrant
Liabilities		   Derivative
Liability		   Contingent
Consideration		 
             
Fair value at January 1, 2024  $116   $-   $107 
Reclassification of Exchanged Warrants from equity to liability   11,244    -    - 
Initial measurement of Bridge Notes derivative liability   -    5,566    - 
Change in fair value   (414)   (220)   (66)
Reclassification of Exchanged Warrants and Bridge Notes               
derivative liability to equity   (10,945)   (5,346)   - 
Fair value at December 31, 2024  $1   $-   $41 

 

Based off valuations performed during 2024 and as of December 31, 2024, the Company recognized a change in fair value of the Market Cap Contingent Consideration of approximately $0.1 million for the year ended December 31, 2024.

 

The Company remeasured the Bridge Notes derivative liability by taking the difference between the fair value of the Bridge Notes with the conversion feature and without the conversion feature at each reporting period and recorded a $0.2 million credit for the change in fair value during the year ended December 31, 2024.

 

In connection with the approval of the September 2024 Transactions by the Company’s stockholders at the Annual Meeting on October 29, 2024, the Exchanged Warrants were exchanged for and the Bridge Notes were converted to shares of the Company’s common stock. The liability related to the Exchanged Warrants and the outstanding principal and interest of the Bridge Notes as well as the derivative liability were reclassified to equity. As of December 31, 2024, there were no liability balances related to the derivative liability or the Exchange Warrants.

 

The table below is provided for comparative purposes only and presents information about the fair value of the Company’s Convertible Notes relative to the carrying values recognized in the condensed consolidated balance sheet as of December 31, 2023 (in thousands).

 

      December 31, 2023 
   Level  Carrying
Value		   Fair
Value		 
Convertible Notes  3  $16,616   $17,594 

 

In connection with the approval of the September 2024 Transactions by the Company’s stockholders at the Annual Meeting on October 29, 2024, the Convertible Notes were exchanged for shares of the Company’s common stock. As of December 31, 2024, there were no Convertible Notes outstanding.

 

The Company assessed the fair value of the Convertible Notes as of December 31, 2023 using a binomial model, which is considered a Level 3 measurement. The inputs used for the assessment were risk-free rate of 4.07%, expected term of 2.3 years, stock price of $1.80, volatility of 108% and dividend yield of 0% done.