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Fair Value Measurements

12 Months Ended

Sep. 30, 2022

Fair Value Measurements

Fair Value Measurements

4. Fair Value Measurements

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis:


		September 30, 2022
		(Level 1)			(Level 2)			(Level 3)
Liabilities
Warrant liability		$	—		$	—		$	57,138


		September 30, 2021
		(Level 1)			(Level 2)			(Level 3)
Liabilities
Warrant liability		$	—		$	—		$	522,918

The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for the warrant liability and unsecured convertible promissory note for the years ended September 30, 2022 and 2021:


		Unsecured Convertible
		Promissory Note			Warrants
Balance at October 1, 2020		$	—		$	70,772
Fair value at issuance date			12,051,581			—
Change in fair value			—			452,146
Balance at September 30, 2021			12,051,581			522,918
Change in fair value			882,903			(465,780)
Repayment			(12,934,484)			—
Balance at September 30, 2022		$	—		$	57,138

As further described in Note 8, the Company elected the fair value option to account for its amended unsecured convertible promissory note. The fair value of the amended unsecured convertible promissory note at issuance and subsequent to issuance was estimated using a discounted cash flow model. Significant estimates in the cash flow model include the discount rate and the probability and timing of redemption. The amended unsecured convertible promissory note was repaid in full during the year ended September 30, 2022.

The warrants issued in connection with convertible senior secured notes originally issued pursuant to a certain Note and Warrant Purchase Agreement dated December 22, 2017, are classified as liabilities on the accompanying consolidated balance sheets as the warrants include cash settlement features at the option of the holders under certain circumstances. The warrant liability is revalued each reporting period with the change in fair value recorded in the accompanying consolidated statements of operations until the warrants are exercised or expire. The fair value of the warrant liability is estimated using the Black-Scholes option pricing model using the following weighted-average assumptions:


		September 30,
		2022				2021
Risk-free interest rate			4.23	%			0.62	%
Remaining contractual term of warrants (years)			2.4				3.4
Expected volatility			92.5	%			124.7	%
Annual dividend yield			—	%			—	%
Fair value of common stock (per share)		$	1.22			$	2.17

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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