Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

Fair Value Measurements

9 Months Ended

Sep. 30, 2023

4. Fair Value Measurements

The following fair value hierarchy table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 (in thousands):


	Fair Value Measurement as of September 30, 2023
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	4,086	$	—	$	—
Marketable securities		—		—		—
Warrant liabilities		—		—		652
Total	$	4,086	$	—	$	652


	Fair Value Measurement as of December 31, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	7,596	$	—	$	—
Marketable securities		4,775		—		—
Warrant liabilities		—		—		9,299
Total	$	12,371	$	—	$	9,299

The Company issued warrants to the purchasers of its 2020 Offering (the “2020 Warrants”). The Company determined that these warrants should be classified as a liability and considered as a Level 3 financial instrument (see also Note 9, “Capital Structure”). The 2020 Warrants were re-measured at each subsequent reporting period and changes in fair value have been recognized in the consolidated statement of operations. The following assumptions were used in a Black-Scholes option-pricing model to determine the fair value of the warrant liability as of December 31, 2022. On May 27, 2023, the 2020 Warrants expired in accordance with their terms and are no longer exercisable.


	As of December 31, 2022
Expected volatility		80.2	%
Remaining contractual term (in years)		0.42
Risk-free interest rate		4.76	%
Expected dividend yield	— %

The Company issued the Class A Warrant and Class B Warrant to the purchaser of its 2022 Offering (together, the “2022 Warrants”). The Company determined that these warrants should be classified as a liability and considered as a Level 3 financial instrument (see also Note 9, “Capital Structure”). On June 26, 2023, the Class A Warrant and Class B Warrant, together with the 2023 Warrant, were exercised in full pursuant to the Inducement Agreement. The 2022 Warrants were re-measured at each subsequent reporting period and on June 26, 2023 and the changes in fair value have been recognized in the consolidated statement of operations. The following assumptions were used in a Black-Scholes option-pricing model to determine the fair value of the warrant liability:


	Class A Warrants						Class B Warrants
	As of June 26, 2023			As of December 31, 2022			As of June 26, 2023			As of December 31, 2022
Expected volatility		135.5	%		99.8	%		129.5	%		140.3	%
Remaining contractual term (in years)		4.63			5.08			0.13			0.58
Risk-free interest rate		4.13	%		3.99	%		5.32	%		4.76	%
Expected dividend yield	— %			— %			—%			—%

On June 27, 2023, the Company issued the Class C Warrant pursuant to the Inducement Agreement and determined that this warrant should be classified as a liability and considered as a Level 3 financial instrument (see also Note 9, “Capital Structure”). The Class C Warrant was re-measured at each subsequent reporting period and the changes in fair value have been recognized in the consolidated statement of operations. The following assumptions were used in a Black-Scholes option-pricing model to determine the fair value of the warrant liability:


	As of September 30, 2023			At Issuance
Expected volatility		130.0	%		129.1	%
Remaining contractual term (in years)		5.17			5.25
Risk-free interest rate		4.60	%		4.02	%
Expected dividend yield	— %			— %

Warrant liabilities

The following tables present a reconciliation of the Company’s financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2023 and 2022 (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Balance at beginning of period	$	1,861		$	4,826		$	9,299		$	2,530
Issuance of Class C Warrant		—			—			1,793			—
(Decrease) increase in fair value (1)		(1,209	)		(4,823	)		(8,998	)		(2,527	)
Exercise of underlying warrants (2)		—			—			(1,442	)		—
Balance at end of period	$	652		$	3		$	652		$	3

(1)

The change in fair values of the warrant liabilities is recorded in other income in the consolidated statement of operations.

(2)

The remaining fair value of the warrant liabilities at the time of exercise was transferred into additional paid-in capital in the consolidated balance sheet.

The key inputs into the Black-Scholes option pricing model are the per share value and the expected volatility of the Company’s common stock. Significant changes in these inputs will directly increase or decrease the estimated fair value of the Company’s warrant liability.