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Convertible Notes
 9 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
Convertible Notes Convertible Notes
In July 2021, the Company issued convertible notes (“July 2021 Convertible Notes”) to investors with an underlying principal amount of $2.1 million. The July 2021 Convertible Notes accrue simple interest at an annual rate of 4% and mature on July 1, 2026. The July 2021 Convertible Notes may be settled under the following scenarios at the option of the holder: (i) at any time into common shares equal to the conversion amount of outstanding principal and any accrued but unpaid interest divided by the conversion price of $11.96; (ii) at the option of the holder upon a liquidation event a) paid in cash equal to the outstanding principal and any accrued but unpaid interest or b) into common shares equal to the conversion amount of outstanding principal and any accrued but unpaid interest divided by the conversion price of $11.96; or (iii) upon maturity, settlement in cash at the outstanding accrued interest and principal amount.
Certain conversion and redemption features of the July 2021 Convertible Notes were determined to not be clearly and closely associated with the risk of the debt-type host instrument and were required to be separately accounted for as derivative financial instruments. The Company bifurcated these embedded conversion and redemption (“embedded derivatives”) features and classified these as liabilities measured at fair value. The fair value of the derivative liability of $0.7 million was recorded separate from the July 2021 Convertible Notes with an offsetting amount recorded as a debt discount. The debt discount is amortized over the estimated life of the debt using the straight-line method, as the value attributable to the July 2021 Convertible Notes was zero upon issuance.
As of September 30, 2022 the unamortized amount and net carrying value of the July 2021 Convertible Notes is $1.6 million and $0.5 million, respectively. The amount by which July 2021 Convertible Notes if-converted value does not exceed its principal is $(0.4) million as of September 30, 2022.

As of December 31, 2021 the unamortized amount and net carrying value of the July 2021 Convertible Notes is $1.9 million and $0.2 million, respectively. The amount by which July 2021 Convertible Notes if-converted value exceeds its principal is $1.6 million as of December 31, 2021.
In connection with the July 2021 Convertible Notes, the Company issued warrants to purchase 88,213 shares of the Company’s common stock with an exercise price of $0.01 per share and a term of one year (Warrant Tranche 1), 44,106 shares of the Company’s common stock with an exercise price of $11.96 per share and a term of 5 years (Warrant Tranche 2), and 44,106 shares of the Company’s common stock which is exercisable starting twelve months from the issuance date with an exercise price of $11.96 per share and a term of 5 years (Warrant Tranche 3).
The fair value of the warrants was determined using the Black-Scholes option-pricing method, with the following assumptions:
Warrants
Tranche 1		Warrants
Tranche 2		Warrants
Tranche 3
Fair market value of common stock$15.36 $15.36 $15.36 
Expected dividend yield0 %0 %0 %
Risk-free interest rate0.09 %0.89 %0.89 %
Expected volatility52.00 %47.40 %47.40 %
Expected term (in years)155
The warrants were recorded to additional paid-in capital during the year ended December 31, 2021. The relative fair value of the warrants issued in connection with the July 2021 Convertible Notes was $0.8 million and was recorded as a debt discount that is being amortized to interest expense under the straight-line method over the term of respective convertible notes.
As a result of the beneficial conversion feature associated with the July 2021 Convertible Notes, $0.6 million was added to additional paid-in capital during the year ended December 31, 2021. The beneficial conversion feature was recorded as a debt discount and is being amortized to interest expense under the straight-line method over the term of the respective notes.
The Company recognized a total of $0.1 million and $0.3 million in non-cash interest expense related to the July 2021 Convertible Notes for the three and nine months ended September 30, 2022, respectively.
The Company has also issued convertible notes, September 2021 Convertible Notes, in connection with an acquisition. Refer to Note 7 “Business Combinations” for further details.
Convertible notes, current and noncurrent consist of the following (in thousands):
As of September 30,As of December 31,
20222021
Convertible notes, current:
September 2021 Convertible Notes$3,405 $4,160 
Revesting Notes49 62 
Convertible notes, noncurrent:
July 2021 Convertible Notes529 213 
September 2021 Convertible Notes3,356 7,947 
Revesting Notes24 124 
Total convertible notes$7,363 $12,506