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Fair Value of Financial Instruments | 3 Months Ended
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Mar. 31, 2023
Fair Value of Financial Instruments [Abstract] |
Fair Value of Financial Instruments | Note 2: Fair Value of Financial Instruments The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis and the basis for that measurement (in thousands):
|  | March 31, 2023 |
|  | Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds (1) |  | $ | 81 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Corporate notes and commercial paper |  | $ | 587 |  |  | $ | — |  |  | $ | 587 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Warrant |  | $ | 1,421 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,421 |
|  | December 31, 2022 |
|  | Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds (1) |  | $ | 73 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Corporate notes and commercial paper |  | $ | 1,078 |  |  | $ | — |  |  | $ | 1,078 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Warrant |  | $ | 2,079 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,079 |
(1) | Amounts are included in cash and cash equivalents on the condensed consolidated balance sheets.
The following tables represents the Company’s determination of fair value for its financial assets (cash equivalents and investments) (in thousands):
|  | March 31, 2023 |
|  |  |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
Cash and cash equivalents |  | $ | 805 |  |  | $ | — |  |  | $ | — |  |  | $ | 805 |
Short-term investments |  |  | 573 |  |  |  | 14 |  |  |  | — |  |  |  | 587 |
|  | $ | 1,378 |  |  | $ | 14 |  |  | $ | — |  |  | $ | 1,392 |
|  | December 31, 2022 |
|  |  |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
Cash and cash equivalents |  | $ | 1,828 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,828 |
Short-term investments |  |  | 1,103 |  |  |  | — |  |  |  | (25 | ) |  |  | 1,078 |
|  | $ | 2,931 |  |  | $ | — |  |  | $ | (25 | ) |  | $ | 2,906 |
Warrant Classified as Liability A warrant to purchase shares of our common stock at an exercise price of $1.00 per share (the Purchase Warrant) was issued on November 30, 2022 in conjunction with a registered direct offering to an institutional investor. The stock purchase agreement governing the Purchase Warrant provides for a value calculation for the Purchase Warrant using the Black Scholes model in the event of certain fundamental transactions (as defined in the stock purchase agreement). The fair value calculation provides for a floor on the volatility amount utilized in the value calculation at 100% or greater. The Company has determined this provision introduces leverage to the holder of the Purchase Warrant that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares. Therefore, pursuant to ASC 815, the Company has classified the Purchase Warrant as a liability in its condensed consolidated balance sheets. The classification of the Purchase Warrant, including whether the Purchase Warrant should be recorded as liability or as equity, is evaluated at the end of each reporting period with changes in the fair value reported in other income (expense) in the condensed consolidated statements of operations and comprehensive loss. The fair value of the Purchase Warrant at March 31, 2023 was determined using the Black Scholes model with the following assumptions: (i) expected term based on the contractual term of 5.4 years, (ii) risk-free interest rate of 4.00%, which was based on a comparable US Treasury 5-year bond, (iii) expected volatility of 114% and (iv) an expected dividend of zero. As of March 31, 2023, the Company had the following liability-classified warrant outstanding (amounts in thousands):
|  | Number of warrants on |  |  |  |
|  | common shares |  |  | Amount |
Balance as of December 31, 2021 |  |  | — |  |  | $ | — |
Recognition of warrant liability |  |  | 3,675 |  |  |  | 3,674 |
Change in fair value of warrant |  |  | — |  |  |  | (1,595 | )
Balance as of December 31, 2022 |  |  | 3,675 |  |  |  | 2,079 |
Change in fair value of warrant |  |  | — |  |  |  | (658 | )
Balance as of March 31, 2023 |  |  | 3,675 |  |  | $ | 1,421 |

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- Definition 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 Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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