The Company has issued warrants that are accounted for as liabilities in accordance with ASC 815. Estimating fair values of liability-classified financial instruments requires the development of estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of the Company’s common stock. Because liability-classified financial instruments are initially and subsequently carried at fair value, the Company’s financial results will reflect the volatility in these estimate and assumption changes. Changes in fair value are recognized as a component of other income (expense) in the condensed consolidated statement of operations.

In connection with the transactions contemplated by the Merger, on December 16, 2020, the Company entered into a securities purchase agreement (the "Securities Purchase Agreement") with an investor (the "Investor") pursuant to which, among other things, warrants to purchase 858,892 shares of the Company’s common stock (“Senior Secured Promissory Note Warrants”) were issued.

On May 20, 2021, pursuant to the terms of the Securities Purchase Agreement, the Company issued to the Investor warrants to purchase 4,995,893 shares of common stock at an exercise price of $4.70 per share (the “May 2021 Warrants”). In June 2021, pursuant to the reset provisions of the Securities Purchase Agreement, the number of shares of common stock underlying the May 2021 Warrants increased to 5,303,568 shares and the exercise price was reduced to $3.88 per share. All of the outstanding May 2021 Warrants were exercised in the fourth quarter of 2021 and the first quarter of 2022 in exchange for 5,303,568 shares of the Company's common stock in a series of exercises by the Investor. As of September 30, 2022, there are no May 2021 Warrants outstanding.

On July 21, 2021, the Company and the Investor entered into an agreement to waive certain provisions of the previous Security Purchase Agreement (the "July 2021 Waiver Agreement"). As part of the July 2021 Waiver Agreement, the Investor agreed to waive the reset provisions of the Senior Secured Promissory Note Warrants and the May 2021 Warrants such that the number of shares and exercise price in effect immediately prior to the effective date of the

Waiver Agreement shall no longer be subject to price-based resets. The waiver of the reset provision of the Senior Secured Promissory Note Warrants and the May 2021 Warrants is considered a modification to those warrants and as a result, the underlying warrants were re-valued using a Black-Scholes based valuation model, which resulted in a favorable change in the fair value of the underlying warrants of $3.9 million. As consideration for the July 2021 Waiver Agreement, the Company issued the Investor additional warrants to purchase 1,100,000 shares of the Company's common stock at an exercise price of $3.63 per share (the "July 2021 Warrants"). The initial fair value of the July 2021 Warrants was determined to be $1.7 million and is included in loss on issuance of warrants at the condensed consolidated statements of operations for the three and nine months ended September 30, 2021.

On January 31, 2022, the Company and the Investor entered into an agreement to irrevocably waive any adjustment to the exercise price of the Senior Secured Promissory Note Warrants and the May 2021 Warrants held by the Investor from and after January 31, 2022 ("the Effective Date") for the Company's issuances of equity or equity-linked securities at a price below the exercise price of the warrants (the "January 2022 Waiver Agreement"). The waiver of any adjustments to the exercise price of the Senior Secured Promissory Note Warrants and the May 2021 Warrants is considered a modification to those warrants. The modification was determined to have no impact on the valuation of the warrants.

As consideration for the foregoing, pursuant to the January 2022 Waiver Agreement, the Company issued the Investor an additional warrant to purchase up to 2,250,000 shares of the Company’s common stock (the “January 2022 Warrants”). The initial fair value of the January 2022 Warrants was determined to be $1.1 million and is included in loss on issuance of warrants in the condensed consolidated statements of operations for the nine months ended September 30, 2022. The initial fair value was determined using a Monte Carlo simulation model that considered: (i) the starting stock price of $1.17, (ii) certain key event dates such as expected capital financings, if any, (iii) an expected re-levered volatility of 93.0 percent, (iv) an estimated risk-free interest rate of 1.65 percent, (v) an estimated contractual term of approximately 5.5 years, and (vi) a zero percent dividend rate.

As of September 30, 2022, the fair value of the Senior Secured Promissory Note Warrants of $2,000 was determined using a Black-Scholes valuation model that used the following assumptions: (i) a stock price of $0.10, (ii) an exercise price per share of $3.88, (iii) an estimated risk-free interest rate of approximately 4.17 percent, (iv) an estimated contractual term of 3.86 years, (v) volatility of 75.5%, and (vi) a zero percent dividend rate.

As of September 30, 2022, the fair value of the July 2021 Warrants in the amount of $16,000 was determined using a Monte Carlo simulation model that considered: (i) a starting stock price of $0.10, (ii) an expected re-levered volatility of 104.9 percent; (iv) an estimated risk-free rate of 4.13 percent, (v) estimated contractual terms of approximately 4.31 years, and (vi) a zero percent dividend rate.

As of September 30, 2022, the fair value of the January 2022 Warrants in the amount of $63,000 was determined using a Monte Carlo simulation model that used the following assumptions: (i) a starting stock price of $0.10, (ii) an expected re-levered volatility of 104.2 percent; (iii) an estimated risk-free rate of 4.08 percent, (iv) estimated contractual terms of approximately 4.83 years, and (v) a zero percent dividend rate.

The following table summarizes the activity of the Company’s Level 3 warrant liabilities during the three and nine months ended September 30, 2022 and 2021 (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
Warrant Liabilities	2022			2021			2022			2021
Fair value at beginning of period	$	469		$	20,526		$	2,651		$	1,830
Initial fair value at the original issuance date		—			1,672			1,110			25,417
Equity classified warrant put feature activated		—			—			—			51
Change in fair value during the period		(385	)		(12,764	)		(2,403	)		(17,939	)
Fair value of warrants exercised		—			—			(1,274	)		—
Seneca liability classified warrants assumed		—			—			—			200
Expiration of equity classified warrant put feature		—			—			—			(26	)
Settlement of liability-classified warrants		—			—			—			(99	)
Fair value at end of period	$	84		$	9,434		$	84		$	9,434

Seneca had certain common stock purchase warrants that were originally issued in connection with May 2016 and August 2017 offerings that are accounted for as liabilities whose fair value was determined using Level 3 inputs. The May 2016 warrants expired in the second quarter of 2021. As a result of the Merger, the put right was activated on the August 2017 offering warrants and these warrants were valued at their put right value using a Black-Scholes option

pricing model. The Company settled the put feature for 7,813 of these warrants during the quarter ended June 30, 2021. The put right became inactive in July 2021 and the remaining warrants were valued using a Black-Scholes option pricing model. The gains resulting from the changes in the fair value of the liability classified warrants are classified as a gain on change in fair value of warrant liability in the accompanying condensed consolidated statements of operations.

In connection with the May 2022 Registered Direct Offering (see Note 6, Stockholders' Equity), the Company issued to certain investors warrants to purchase up to 3,646,690 shares of its common stock and warrants to purchase up to 218,801 shares of the Company's common stock that were issued to the placement agent. All of these warrants were classified as equity as of the date of issuance of May 10, 2022.

In connection with the August 2022 Public Offering (see Note 6, Stockholders' Equity), the Company issued to certain investors warrants to purchase up to 110,400,000 shares of its common stock and warrants to purchase up to 3,312,000 shares of the Company's common stock that were issued to the underwriter of the offering. All of these warrants were classified as equity as of the date of issuance of August 16, 2022.