Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

4. Fair Value Measurements

The following tables present information about the Company’s assets measured at fair value on a recurring basis, and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

	SEPTEMBER 30, 2022
	TOTAL		LEVEL 1		LEVEL 2		LEVEL 3		NOT SUBJECT TO LEVELING(1)
Liabilities:
Derivative liability – warrants	$	5,428	$	—	$	—	$	5,428	$	—
	$	5,428	$	—	$	—	$	5,428	$	—

	DECEMBER 31, 2021
	TOTAL		LEVEL 1		LEVEL 2		LEVEL 3		NOT SUBJECT TO LEVELING(1)
Assets:
Cash equivalents:
Money market funds	$	67,603	$	—	$	—	$	—	$	67,603
	$	67,603	$	—	$	—	$	—	$	67,603

(1) Certain cash equivalents that are valued using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

As of September 30, 2022 the Company held no cash equivalents. As of December 31, 2021, the Company’s cash equivalents consisted of money market funds invested in U.S. Treasury securities with original maturities of less than 90 days from the date of purchase.

Warrants

The Company’s warrants are recorded as derivative liabilities, and are classified as Level 3 measurements under the fair value hierarchy. These derivatives are not actively traded and are valued using the Black-Scholes option-pricing model, which requires the use of subjective assumptions.

The following inputs were used in the fair market valuation of warrants as of September 30, 2022:

	September 30, 2022
Risk-free rate(1)		4.06	%
Expected term		4.96
Stock price(2)	$	0.78
Strike price(3)	$	1.88
Common stock volatility(4)		79.93	%
Dividend yield(5)		—	%

(1)Based on the U.S. Treasury yield curve, with terms commensurate with the expected term of the warrants.

(2)The closing price of the Company's common stock on the last trading day of the quarter ended September 30, 2022.

(3)As per the agreement for the warrant.

(4)Expected volatility based on historical volatility of the Company's peer companies that are commensurate with the expected term of the warrants.

(5)The Company has not paid and does not anticipate paying cash dividends on its shares of common stock in the foreseeable future; therefore, the expected dividend yield is assumed to be zero.

The warrants are recorded at fair value at each reporting date and changes in fair value are recorded in other (expense) income, net within the Company's consolidated statements of operations.

The following table reflects the change in the Company's Level 3 warrants from December 31, 2021 through September 30, 2022 (in thousands):

	Warrants
	(in thousands)
Balance at December 31, 2021	$	—
Issuance fair value at September 15, 2022		8,150
Change in fair value, recorded as a gain on derivative liability - warrants		(2,722	)
Balance at September 30, 2022	$	5,428