Quarterly report pursuant to Section 13 or 15(d)

Fair Value of Financial Instruments

v3.22.1
Fair Value of Financial Instruments
3 Months Ended
Mar. 31, 2022
Fair Value Of Financial Instruments  
Fair Value of Financial Instruments

Note 9 — Fair Value of Financial Instruments

 

The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

 

ASC 820 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 on the measurement date. ASC 820 also establishes a 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. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

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

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

 

The carrying amounts of the Company’s financial instruments, such as cash, accounts receivable and accounts payable, approximate fair values due to the short-term nature of these instruments. The carrying amount of the Company’s notes payable approximates fair value because the effective yields on these obligations, which include contractual interest rates, taken together with other features such as concurrent issuance of warrants, are comparable to rates of returns for instruments of similar credit risk.

 

 

The following fair value of financial assets and liabilities and the input level used to determine the fair value as of March 31, 2022 and December 31, 2021 is presented below:

 

   

Fair Value Measurements as of

March 31, 2022

 
    Level 1     Level 2     Level 3  
                   
Assets:                        
Short-term investments   $ 210,000     $ -     $ -  
                         
Liabilities:                        
Warrant liability     -       -       429,023,674  
Total     210,000       -       429,023,674  

 

   

Fair Value Measurements as of

December 31, 2021

 
    Level 1     Level 2     Level 3  
                   
Assets:                        
Short-term investments   $ 178,000     $ -     $ -  
                         
Liabilities:                        
Warrant liability     -       -       198,566,170  
Total     178,000       -       198,566,170  

 

The following table presents a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2022 and 2021, respectively:

 

    Warrant Liability  
       
Balance, January 1, 2022   $ 198,566,170  
Issuance of warrants     243,681,478  
Change in fair value of warrants     86,948,858
Exercise of warrants     (100,029,444 )
Balance, March 31, 2022   $ 429,167,462  

 

    Warrant Liability  
       
Balance, January 1, 2021   $ -  
Issuance of warrants     77,083,044  
Change in fair value of warrants     (18,627,843 )
Exercise of warrants     (219,636 )
Balance, March 31, 2021   $ 58,235,565