NOTE 7: FAIR VALUE MEASUREMENTS

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:

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Placement Agent Warrants

Pursuant to the terms of the Company’s Class A Preferred Stock offering (see Note 15), the Company was required to issue upon a Qualified Financing (an external financing of $25.0 million or greater) warrants to the placement agent (“the Placement Agent Warrants”) to purchase 5% of the shares of common stock into which the Class A Preferred Stock converts. This condition was met by the Company’s IPO. The Placement Agent Warrants have a term of five years and are exercisable at a 15% discount to the Qualified Financing price. The Company valued the Placement Agent Warrants using a Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Journey’s warrant liability that are categorized within Level 3 of the fair value hierarchy before the conversion was as follows:

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In connection with the Company’s IPO, the Company issued 111,567 shares of common stock related to the conversion of all of the Placement Agent Warrants.

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Contingent Payment Derivative

In connection with the DFD-29 Agreement, the Company agreed to pay DRL additional consideration upon either an IPO of the Company’s common stock or an acquisition of the Company, the agreement further specifies that only one payment can be made. The contingent payment associated with an IPO of the Company’s common stock, is deemed to be achieved if upon the completion of an IPO the Company’s market capitalization on a fully diluted basis is $150 million or greater at the close of business on the date of such IPO. The payment due for the achievement of the IPO criteria is a follows: (a) issue to DRL a number of shares of the Company’s common stock equal to $5.0 million as calculated using a fifteen (15) day volume weighted average price (“VWAP”) of the Company’s closing price, measured fifteen (15) days following the IPO; or (b) make a cash payment to DRL equal to $5.0 million. As a result of the IPO on November 16, 2021, calculated using a 15-day VWAP of $9.1721 per share, the Company issued 545,131 shares of Journey common stock to DRL in a transaction exempt from registration under the Securities Act. The restrictions on the shares of common stock issued in such transaction are governed by the terms set forth in the DFD-29 Agreement and applicable securities laws.

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The Company valued the contingent payment discussed above utilizing a Probability Weighted Expected Return Method (PWERM) model using a discount rate of 30% and expected term of 3 - 5 months.

The table below provides a roll-forward of the changes in fair value of Level 3 financial instruments as of December 31, 2022 and 2021:

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During the years ended December 31, 2022 and 2021, no transfers occurred between Level 1, Level 2, and Level 3 instruments.