Fair Value Measurements

9 Months Ended

Sep. 30, 2022

The Company measures and reports certain financial instruments as assets and liabilities at fair value on a recurring basis. These liabilities are considered Level 3 instruments.

The fair value of these instruments as of September 30, 2022 and December 31, 2021 are classified as follows (in thousands):


	As of September 30, 2022
	Level 1		Level 2		Level 3		Total

Liabilities:
Derivative liability (Note 10)	$	—	$	—	$	213	$	213
Convertible notes (Note 9)	—		—		6,834		6,834
Total	$	—	$	—	$	7,047	$	7,047


	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
Liabilities:
Derivative liability (Note 10)	$	—	$	—	$	1,396	$	1,396
Convertible notes (Note 9)	—		—		12,293		12,293
Contingent consideration	—		—		9,500		9,500
Total	$	—	$	—	$	23,189	$	23,189

The change in fair value of the Level 3 instruments were as follows (in thousands):


	As of September 30, 2022
	Derivative liability (Note 10)		Convertible notes (Note 9)		Contingent consideration

Fair value, beginning of the year	$	1,396	$	12,293	$	9,500
Vesting of revesting notes	—		122		—
Forfeiture of revesting notes	—		(235)		—
Repayment of convertible notes (Note 9)	—		(3,471)		—
Issuance of common stock in settlement of contingent consideration	—		—		(4,221)
Changes in fair value	(1,183)		(1,875)		(5,279)
Fair value, end of quarter	$	213	$	6,834	$	—


	As of December 31, 2021
	Derivative liability (Note 10)		Convertible notes (Note 9)		Contingent consideration
Fair value, beginning of the year	$	—	$	—	$	—
Issuance of derivative liability	663		—		—
Issuances of convertible notes	—		11,597		—
Issuance of revesting notes	—		186		—
Issuance of contingent consideration	—		—		5,900
Changes in fair value	733		510		3,600
Fair value, end of year	$	1,396	$	12,293	$	9,500

For the three and nine months ended September 30, 2022, the Company recorded a loss associated with the change in fair value of the derivative liability of $0.1 million and gain of $1.2 million, respectively. For the three and nine months ended September 30, 2022, the Company recorded a loss associated with convertible notes of $0.2 million and gain of $1.9 million, respectively. For the year ended December 31, 2021, the Company had recorded a loss associated with the change in fair value of the derivative liability and convertible notes of $0.7 million and $0.5 million, respectively. The amounts have been recorded in other income (expense), net in the condensed consolidated statement of operations and comprehensive loss.

The Company has recorded a gain associated with the change in fair value of the contingent consideration of $0 million and $5.3 million for the three and nine months ended September 30, 2022, in general and administrative expense in the condensed consolidated statement of operations and comprehensive loss. For the three and nine months ended September 30, 2021, the Company recorded a loss associated with the change in fair value of the derivative liability of $0.4 million and gain of $0.4 million, respectively. No gain or loss associated with changes in fair value of convertible notes or contingent consideration were recorded for the three and nine months ended September 30, 2021.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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