Note 9 Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Fair Value Disclosures [Text Block]

9. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

•

Level 1 - quoted prices in active markets for identical assets or liabilities;

•

Level 2 - quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or

•

Level 3 - unobservable inputs for the asset or liability, such as discounted cash flow models or valuations.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following is a listing of the Company’s warrant liabilities required to be measured at fair value on a recurring basis and where they are classified within the fair value hierarchy as of June 30, 2022 and December 31, 2021:

		June 30, 2022
		Level 1				Level 2				Level 3				Total
Liabilities:
Warrant liability			—				—				105,699				105,699
Total		$	—			$	—			$	105,699			$	105,699

		December 31, 2021
		Level 1				Level 2				Level 3				Total
Liabilities:
Warrant liability		$	—			$	—			$	372,730			$	372,730
Total		$	—			$	—			$	372,730			$	372,730

The following table summarizes the changes in the fair value of the warrant liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Balance, beginning of period		$	283,720				1,040,305				372,730				1,963,785
Change in fair value of warrant liability			(178,021	)			(189,146	)			(267,031	)			(1,112,626	)
Balance, end of period		$	105,699			$	851,159			$	105,699			$	851,159

The Company classified the private warrants pursuant to ASC 815 as derivative liabilities with subsequent changes in their fair values to be recognized in the consolidated financial statements at each reporting date. The Company calculated the fair value of the private warrants as of June 30, 2022 as $105,699 using a Black-Scholes model. The key inputs used in the Black-Scholes calculation were, the risk-free interest rate, expected volatility, expected life, exercise price and stock price. The risk-free interest rate was estimated to be 2.99%, the expected volatility was estimated to be 90.3%, and the expected life was estimated to be 3.46 years. The exercise price was $11.50, and the stock price $1.10. Due to fair value changes during the three and six months ended June 30, 2022, the Company recorded a gain on remeasurement of warrant liabilities of $178,021 and $267,031, respectively.

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