| Fair Value Measurement |
NOTE 2: Fair Value Measurement The Company determines the fair market values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following are three levels of inputs that may be used to measure fair value: | ● | Level 1 – Quoted prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| ● | Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| ● | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The valuation of Level 3 investments requires the use of significant management judgments or estimation. |
In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3. Level 3 liabilities that are measured at fair value on a recurring basis consist of the convertible preferred stock warrant liability. The inputs used in estimating the fair value of the warrant liability are described in Note 6 - Capital Stock and Warrants. The following tables summarize, for each category of assets or liabilities carried at fair value, the respective fair value as of December 31, 2022 and 2021 and the classification by level of input within the fair value hierarchy: | | | | | | | | | | | | | | | Total | | Level 1 | | Level 2 | | Level 3 | December 31, 2022 | | | | | | | | | | | | | Assets | | | | | | | | | | | | | Cash equivalents: | | | | | | | | | | | | | Money market funds | | $ | 3,025 | | $ | 3,025 | | $ | — | | $ | — | Liabilities | | | | | | | | | | | | | Warrant liability – Series m-3 Preferred Stock | | $ | 1,282 | | $ | — | | $ | — | | $ | 1,282 | Warrant liability – Series s Preferred Stock | | $ | 8,729 | | $ | — | | $ | — | | $ | 8,729 | Derivative liability – Class A Common Stock warrants | | $ | 1,146 | | $ | — | | $ | — | | $ | 1,146 | 2022 Convertible Notes | | $ | 8,152 | | $ | — | | $ | — | | $ | 8,152 |
| | | | | | | | | | | | | | | Total | | Level 1 | | Level 2 | | Level 3 | December 31, 2021 | | | | | | | | | | | | | Assets | | | | | | | | | | | | | Cash equivalents: | | | | | | | | | | | | | Money market funds | | $ | 6,623 | | $ | 6,623 | | $ | — | | $ | — | Liabilities | | | | | | | | | | | | | Warrant liability – Series B Preferred Stock | | $ | 370 | | $ | — | | $ | — | | $ | 370 | Warrant liability – Series m-3 Preferred Stock | | $ | 7,156 | | $ | — | | $ | — | | $ | 7,156 | Warrant liability – Series s Preferred Stock | | $ | 23,040 | | $ | — | | $ | — | | $ | 23,040 |
During the years ended December 31, 2022 and 2021, there were no transfers between Level 1, Level 2, or Level 3 assets or liabilities reported at fair value on a recurring basis and the valuation techniques used did not change compared to the Company’s established practice. The following table sets forth a summary of the changes in the fair value of Company’s Level 3 warrant and derivative liability during the years ended December 31, 2022 and 2021, which were measured at fair value on a recurring basis: | | | | | | Warrant and Derivative Liability | Balance as of January 1, 2021 | | $ | 5,617 | Initial fair value of Series s Preferred Stock warrants | | | 10,564 | Expired warrants | | | (14) | Exercise of warrants | | | (1,319) | Revaluation of Series B, m-1, m-3 and s Preferred Stock warrants | | | 15,718 | Balance as of December 31, 2021 | | | 30,566 | Initial fair value of Class A Common Stock warrants | | | 1,818 | Exercise of warrants | | | (370) | Revaluation of Class A Common Stock, Series B, m-3 and s Preferred Stock warrants | | | (20,857) | Balance as of December 31, 2022 | | $ | 11,157 |
The following table sets forth a summary of the changes in the fair value of the Company’s level 3 convertible note during the year ended December 31, 2022, which were measured at fair value on a recurring basis: | | | | Issunace | | $ | 3,182 | Accretion of interest | | | 320 | Change in fair value | | | 4,650 | Balance as of December 31, 2022 | | $ | 8,152 |
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