Quarterly report [Sections 13 or 15(d)]

FAIR VALUE MEASUREMENTS

v3.25.1
FAIR VALUE MEASUREMENTS
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

NOTE 5 – FAIR VALUE MEASUREMENTS

 

The Company calculates the fair value of the Company’s assets and liabilities that qualify as financial instruments and includes additional information in the notes to the consolidated financial statements when the fair value is different than the carrying value of these financial instruments. The estimated fair value of other receivables, prepaid expenses and other current assets, other assets, accounts payable, and accrued expenses approximate their carrying amounts due to the relatively short maturity of these instruments. The estimated fair value of the Loan Agreement as of March 31, 2025 and December 31, 2024, was $24.3 million and $24.7 million, respectively. Both observable and unobservable inputs were used to determine the fair value of long-term debt, which was classified within the Level 3 category.

 

U.S. GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. This guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

 

  ● Level 1 - Quoted prices in active markets for identical assets or liabilities.
     
  ● Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
     
  ● Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar valuation techniques that use significant unobservable inputs.

 

The Company has segregated all financial assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below.

 

The following table provides a summary of financial assets measured at fair value on a recurring and non-recurring basis (in thousands):

 

Description  

Fair Value at

March 31, 2025

     Level 1     Level 2     Level 3  
                         
Recurring Assets                                
Cash equivalents                                
Money market funds   $ 9,554     $ 9,554     $ —     $ —  
Money market deposit account     5,145       5,145       —       —  
Short-term investments                                
U.S. treasury securities     35,436       35,436       —       —  
U.S. federal agency securities     32,783       —       32,783       —  
Total assets measured at fair value   $ 82,918     $ 50,135     $ 32,783     $ —  
                                 
Liabilities                                
Warrant liabilities   $ 24,769     $ —     $ —     $ 24,769  
Total liabilities measured at fair value   $ 24,769     $ —     $ —     $ 24,769  

 

 

Description  

Fair Value at

December 31, 2024

     Level 1     Level 2     Level 3  
                         
Recurring Assets                                
Cash equivalents                                
Money market funds   $ 17,627     $ 17,627     $ —     $ —  
Money market deposit account     5,109       5,109       —       —  
Short-term investments                                
U.S. treasury securities     23,968       23,968       —       —  
U.S. federal agency securities     40,375       —       40,375       —  
Certificates of deposit     10,020       —       10,020       —  
Total assets measured at fair value   $ 97,099     $ 46,704     $ 50,395     $ —  
                                 
Liabilities                                
Warrant liabilities   $ 32,014     $ —     $ —     $ 32,014  
Total liabilities measured at fair value   $ 32,014     $ —     $ —     $ 32,014  

 

Warrant Liabilities

 

As of March 31, 2025 and December 31, 2024, the Company had the following outstanding warrant liabilities:

 

   

March 31, 2025

    

December 31, 2024

  
             
Warrants issued as part of the 2021 public offering, expiration date December 2026, exercise price of $9.75 per share     1,788,000       1,788,000  
Warrants issued as part of the 2022 Private Placement Offering, expiration date November 2027, exercise price $4.75 per share     7,609,879       7,609,879  
Warrants issued as part of the 2024 Loan Agreement, expiration date January 2029, exercise price $4.07 per share     589,681       589,681  

 

The common stock warrants related to the 2021 Public Offering and the 2022 Private Placement are not indexed to the Company’s own stock and therefore have been classified as liabilities at their estimated fair value. The common stock warrants issued in connection with the Loan Agreement issuance were determined to be liability classified under ASC 815 as the common stock warrants were not considered indexed to the Company’s stock. Changes in the estimated fair value of the warrant liabilities is recorded as changes in fair value of warrant liabilities in the condensed consolidated statement of operations and comprehensive loss.

 

In January 2024, as part of the Loan and Security Agreement, see Note 8, the Company issued warrants to purchase $2,400,000 worth of shares of the Company’s stock which have an exercise price equal to the lesser of $4.07 per share and the shares issuable was calculated at 589,681 shares.

 

The following table provides a summary of the activity on the warrant liabilities (in thousands):

 

         
Warrant liabilities as of December 31, 2024   $ 32,014  
Gain recognized in earnings from change in fair value     (7,245 )
Warrant liabilities as of March 31, 2025   $ 24,769  

 

The warrant liabilities are valued using significant inputs not observable in the market. Accordingly, the warrant liability is measured at fair value on a recurring basis using unobservable inputs and are classified as Level 3 inputs within the fair value hierarchy. Fair value measurements categorized within Level 3 are sensitive to changes in the assumptions or methodology used to determine fair value and such changes could result in a significant increase or decrease in the fair value. The Company’s valuation of the common stock warrants utilized the Black-Scholes option-pricing model, which incorporated assumptions and estimates to value the common stock warrants. The Company assessed these assumptions and estimates at the end of each reporting period.

 

 

The following table outlines the key inputs for the Black-Scholes option-pricing model:

 

   

March 31, 2025

    

December 31, 2024

  
             
Common share price   $4.76     $5.57  
Expected term (years)     1.71 – 3.78       1.96 – 4.02  
Risk-free interest rate (%)     3.81% – 3.85%       4.16% – 4.24%  
Volatility (%)    

89.60% - 100.00%

      

92.64% - 100.00%

  
Expected dividend yield (%)     0%     0%