Fair Value Measurements

12 Months Ended

Dec. 31, 2021

Fair Value Measurements

Fair Value Measurements

5. Fair Value Measurements

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis are summarized below:

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	1	$	—	$	—	$	1
Total	$	1	$	—	$	—	$	1
Liabilities:
Derivative liability	$	—	$	—	$	4,875	$	4,875
Other non-current liabilities:
Public Warrants		4,792		—		—		4,792
Private Warrants		—		146		—		146
Total	$	4,792	$	146	$	4,875	$	9,813

	December 31, 2020
	Level 1		Level 2	Level 3	Total
Assets:
Cash equivalents:
Money market funds	$	24,460	—	—	$	24,460
Total	$	24,460	—	—	$	24,460
Liabilities:
Derivative liability		—	—	—		—
Other non-current liabilities:
Public Warrants		—	—	—		—
Private Warrants		—	—	—		—
Total		—	—	—		—

The Company’s investments in money market funds are measured at amortized cost, which approximates fair value.

The Company’s warrant liability as of December 31, 2021 includes public and private warrants that were originally issued by 890, but which were assumed by the Company as part of the Closing of the Business Combination (the “Public Warrants” and “Private Warrants”, respectively, or together, the “Public and Private Warrants”). The Public and Private Warrants are recorded on the balance sheet at fair value. The carrying amount is subject to remeasurement at each balance sheet date. With each remeasurement, the carrying amount is adjusted to fair value, with the change in fair value recognized in the Company’s consolidated statements of operations and comprehensive loss.

The Public Warrants are publicly traded under the symbol “BZFDW”, and the fair value of the Public Warrants at a specific date is determined by the closing price of the Public Warrants as of that date. As such, the Public Warrants are classified within Level 1 of the fair value hierarchy. The closing price of the Public Warrants was $0.98 and $0.50 as of December 3, 2021 and December 31, 2021, respectively.

As of December 31, 2021, Level 3 instruments consisted of the Company’s derivative liability related to the Notes. Fair value measurements categorized within Level 3 are sensitive to changes in the assumptions or methodologies used to determine fair value, and such changes could result in a significant increase or decrease in the fair value. To measure the fair value of the derivative liability, the Company compared the calculated value of the Notes with the indicated value of the host instrument, defined as the straight-debt component of the Notes. The difference between the value of the straight-debt host instrument and the fair value of the Notes resulted in the value of the derivative liability. The value of the straight-debt host instrument was estimated based on a binomial lattice model, excluding the conversion option and the make-whole payment upon conversion.

The following table provides quantitative information regarding the significant unobservable inputs used by the Company related to the derivative liability:

	December 31,		December 3,
	2021		2021
Term (in years)	4.9		5.0
Risk-free rate	1.25	%	1.13	%
Volatility	31.5	%	28.0	%

The following table represents the activity of the Level 3 instruments:

	Derivative
	Liability
Balance as of December 31, 2020		—
Issuance of Notes	$	31,620
Change in fair value of derivative liability		(26,745)
Balance as of December 31, 2021	$	4,875

There were no transfers between fair value measurement levels during the year ended December 31, 2021.