Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

Fair Value Measurements
9 Months Ended
Sep. 30, 2023
Fair Value Measurements [Abstract]  
Fair Value Measurements

17. Fair Value Measurements


The Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis. 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. The three levels related to fair value measurements are as follows:


  Level 1 – Observable inputs such as 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 or liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.


The estimated fair values of accounts receivable, contract assets, accounts payable, accrued expenses, and indebtedness with unrelated parties approximate their carrying amounts due to the relatively short maturity or time to maturity of these instruments. Notes payable with related parties may not be arms-length transactions and therefore may not reflect fair value. The estimated fair value of the Debentures approximates their carrying amount due to their recent issuance.


The Company’s non-financial assets measured at fair value on a recurring basis include SPA Warrants and Private Warrants. These are considered Level 3 measurements as they involve significant unobservable inputs.


In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial liabilities that are required to be measured at fair value on a recurring basis and the related activity for the periods presented:


    Fair Value as of September 30, 2023  
    Carrying Value     Level 1     Level 2     Level 3  
Financial liabilities:                        
Warrant liability - Public Warrants   $ 1,897,500     $ 1,897,500     $
Warrant liability - Private Warrants     1,636,052      
Warrant liability - SPA Warrants     10,969,897      
Total   $ 14,503,449     $ 1,897,500     $
    $ 12,605,949  


The following table sets forth a summary of the changes in fair value of the Company’s financial liabilities:


Balance, December 31, 2022   $ 32,688,341  
Loss on exchange of warrants     590,266  
Change in fair value of warrant liabilities     (18,775,158 )
Balance, September 30, 2023   $ 14,503,449