| Fair Value Measurements |
6. Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 were as follows (in thousands):
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Active |
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Observable |
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Unobservable |
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Markets |
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Inputs |
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Inputs |
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Description |
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September 30, 2022 |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Assets: |
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Cash |
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$ |
165,984 |
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$ |
165,984 |
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— |
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$ |
— |
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Money market funds |
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4,138 |
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4,138 |
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— |
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— |
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Commercial paper |
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1,410 |
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— |
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1,410 |
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— |
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Corporate debt securities - due in one year or less |
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29,686 |
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— |
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29,686 |
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— |
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Commercial paper |
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12,145 |
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— |
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12,145 |
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— |
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Municipal bonds |
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19,216 |
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— |
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19,216 |
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— |
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US Treasury obligation - due in one year or less |
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11,902 |
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11,902 |
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— |
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— |
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Total |
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$ |
244,481 |
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$ |
182,024 |
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$ |
62,457 |
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$ |
— |
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Liabilities: |
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Warrant liability |
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$ |
55,228 |
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$ |
— |
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$ |
— |
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$ |
55,228 |
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Total |
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$ |
55,228 |
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$ |
— |
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$ |
— |
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$ |
55,228 |
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Active |
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Observable |
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Unobservable |
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Markets |
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Inputs |
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Inputs |
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Description |
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December 31, 2021 |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Assets: |
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Cash |
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$ |
57,213 |
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$ |
57,213 |
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$ |
— |
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$ |
— |
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Money market funds |
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35,089 |
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35,089 |
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— |
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— |
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Corporate debt securities - due in one year or less |
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30,088 |
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— |
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30,088 |
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— |
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US Treasury obligation - due in one year or less |
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7,979 |
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7,979 |
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— |
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— |
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US Treasury obligation - due in more than one year to five years |
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3,986 |
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3,986 |
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— |
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— |
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Corporate debt securities - due in more than one year to five years |
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9,052 |
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— |
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9,052 |
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— |
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Total |
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$ |
143,407 |
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$ |
104,267 |
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$ |
39,140 |
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$ |
— |
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Liabilities: |
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Warrant liability |
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$ |
3,029 |
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$ |
— |
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$ |
— |
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$ |
3,029 |
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Total |
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$ |
3,029 |
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$ |
— |
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$ |
— |
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$ |
3,029 |
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Assumptions Used in Determining Fair Value of Warrants
The Company issued the 2022 Warrants to purchase an aggregate of up to 13,813,912 shares of common stock in connection with the 2022 Private Placement (see Note 11) and warrants to purchase an aggregate of up to 282,809 shares of common stock in connection with a private placement on December 8, 2020 (the “2020 Warrants”) (see Note 11). The Company accounted for the 2022 Warrants and 2020 Warrants as liabilities. The Company recorded the fair value of these warrants upon issuance using the Black-Scholes valuation model and is required to revalue these warrants at each reporting date with any changes in fair value recorded on our statement of operations. The valuation of the Warrants is considered under Level 3 of the fair value hierarchy and influenced by the fair value of the underlying common stock of the Company.
A summary of the Black Scholes pricing model assumptions used to record the fair value of the Warrants is as follows:
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September 30, 2022 |
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September 16, 2022 |
December 31, 2021 |
Stock price |
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$ |
6.44 |
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$ |
7.35 |
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$ |
3.26 |
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Risk-free interest rate |
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4.07 |
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% |
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3.62 |
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% |
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1.11 |
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% |
Dividend yield |
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— |
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— |
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— |
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Expected life (in years) |
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4.92 |
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5.00 |
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3.94 |
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Expected volatility |
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86.76 |
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% |
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86.10 |
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% |
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81.14 |
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% |
Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis
The following table reflects the change in the Company’s Level 3 warrant liability for the nine months ended September 30, 2022 and the year ended December 31, 2021 (in thousands):
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September 30, 2022 |
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December 31, 2021 |
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Fair value of warrant liability as of beginning of the period |
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$ |
3,029 |
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$ |
19,711 |
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Fair value of 2022 Warrants issued in connection with private placement |
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64,664 |
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— |
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Change in fair value |
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(12,465 |
) |
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(16,682 |
) |
Fair value of warrant liability as of end of the period |
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$ |
55,228 |
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$ |
3,029 |
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