Derivative Liability

9 Months Ended

Sep. 30, 2022

Warrants and Rights Note Disclosure [Abstract]

Derivative Liability

8.    DERIVATIVE LIABILITY

On August 9, 2022, in connection with the registered public offering discussed in Note 9, the Company issued warrants to purchase 36 million shares of common stock to investors (“Public Warrants”). The Public Warrants have an exercise

price of $0.75 per share, are exercisable upon issuance and will expire five years following the date of issuance. No Public Warrants were exercised or cancelled during the period from the date of issuance through September 30, 2022.

The Company performed an analysis of the provisions of the Public Warrants and concluded that the Public Warrants did not meet the guidance for being classified as an equity instrument due to a potential price reset prompted by a change in an unrelated instrument’s conversion rate, or in the event of a fundamental transaction, settlement rights that differ from those of the underlying common stockholders. As a result, the Public Warrants are being accounted for as a derivative liability instrument in the unaudited condensed consolidated balance sheets. The fair value of the derivative liability as of the issuance date on August 9, 2022 and September 30, 2022 was $9.9 million and $4.5 million, respectively. The change in the fair value of the derivative liability was recognized as a component of nonoperating income (expense) in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss.

The following table summarizes the assumptions used in estimating the fair value of the Public Warrants using the Black-Scholes option pricing model as of the issuance date on August 9, 2022 and as of September 30, 2022:

	August 9,		September 30,
	2022		2022
Stock price	$	0.49	$	0.28
Exercise price	$	0.75	$	0.75
Warrant term		5 years		4.86 years
Expected volatility		78.27		78.41	%
Risk-free interest rate		2.97		4.06	%
Dividend rate		0.00		0.00	%