Fair Value Measurements

9 Months Ended

Sep. 30, 2022

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:

	September 30, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—
Liabilities:
Derivative liability	$	—	$	—	$	1,350	$	1,350
Other non-current liabilities:
Public Warrants		1,920		—		—		1,920
Private Warrants		—		54		—		54
Total	$	1,920	$	54	$	1,350	$	3,324

	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

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

The Company’s warrant liability as of September 30, 2022 and 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 condensed 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 $0.20 and $0.50 as of September 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022 and 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:

	September 30,		December 31,
	2022		2021
Term (in years)	4.2		4.9
Risk-free rate	4.14	%	1.25	%
Volatility	67.3	%	31.5	%

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

	Derivative
	Liability
Balance as of December 31, 2021	$	4,875
Change in fair value of derivative liability		(3,525)
Balance as of September 30, 2022	$	1,350

There were no transfers between fair value measurement levels during the three and nine months ended September 30, 2022.

Equity Investment

For equity investments in entities that the Company does not exercise significant influence over, if the fair value of the investment is not readily determinable, the investment is accounted for at cost, and adjusted for subsequent observable price changes. If the fair value of the investment is readily determinable, the investment is accounted for at fair value. The Company reviews equity investments without readily determinable fair values at each period end to determine whether they have been impaired.

As of September 30, 2022 and December 31, 2021, the Company had an investment in equity securities of a privately-held company without a readily determinable fair value. The total carrying value of the investment, included in prepaid and other assets on the condensed consolidated balance sheets, was $3.6 million and $2.3 million as of September 30, 2022 and December 31, 2021, respectively. The Company concluded that the fair value of the investment increased $1.3 million during the nine months ended September 30, 2022 as the result of observable price changes in orderly transactions for a similar investment in the same issuer.