Fair Value Measurements

9 Months Ended

Sep. 30, 2023

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


	September 30, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	25,205	$	—	$	—	$	25,205
Total	$	25,205	$	—	$	—	$	25,205
Liabilities:
Derivative liability	$	—	$	—	$	30	$	30
Other non-current liabilities:
Public Warrants	484		—		—		484
Private Warrants	—		5		—		5
Total	$	484	$	5	$	30	$	519


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	1,154	$	—	$	—	$	1,154
Total	$	1,154	$	—	$	—	$	1,154
Liabilities:
Derivative liability	$	—	$	—	$	180	$	180
Other non-current liabilities:
Public Warrants	384		—		—		384
Private Warrants	—		11		—		11
Total	$	384	$	11	$	180	$	575

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, 2023 and December 31, 2022 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), which 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 $0.05 and $0.04 as of September 30, 2023 and December 31, 2022, respectively.

As of September 30, 2023 and December 31, 2022, 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, 2023		December 31, 2022
Term (in years)	3.2		3.9
Risk-free rate	4.78	%	4.11	%
Volatility	97.1	%	76.6	%

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


	Derivative Liability
Balance as of December 31, 2022	$	180
Change in fair value of derivative liability	(150)
Balance as of September 30, 2023	$	30

There were no transfers between fair value measurement levels during the three and nine months ended September 30, 2023.

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, 2023 and December 31, 2022, the Company had an investment in equity securities of a privately-held company without a readily determinable fair value. During the second quarter of 2023, the aforementioned private company underwent a recapitalization, and the Company received approximately 6,000 shares of common stock in a non-monetary transaction, valued at $nil. Prior to the recapitalization, the carrying value of the investment was $3.6 million, so the difference between the carrying value and fair value was recorded as loss on investment within Other expense, net within our condensed consolidated statement of operations. During the third quarter of 2023, the Company exchanged a receivable for a $0.8 million investment in the new capital structure of the aforementioned private company (the Company received approximately 500,000 shares of preferred stock). The total carrying value of the investment, included in Prepaid and other assets on the condensed consolidated balance sheets, was $0.8 million and $3.6 million as of September 30, 2023 and December 31, 2022, respectively.

- Definition

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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