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Fair Value Measurements

12 Months Ended

Dec. 31, 2021

Assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that

are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3—Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis—Financial assets and liabilities held by the Company measured at fair value on a recurring basis include money market funds, marketable securities and derivative liabilities.

Assets and Liabilities Measured and Recorded at Fair Value on a Nonrecurring Basis—The Company determines the fair value of long-lived assets held and used, such as intangible assets, by reference to independent appraisals, quoted market prices (e.g. an offer to purchase) and other factors. An impairment charge is recorded when the carrying value of the asset exceeds its fair value. As noted above, there have been no impairment charges recorded to date. Based on the borrowing rates currently available to the Company for debt with similar terms and consideration of default and credit risk, the carrying value of the term loan approximates the fair value and is classified as a Level 2 liability.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The following tables summarizes the types of assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	831	$	—	$	—	$	831
Commercial paper	—		2,000		—		2,000
Corporate bonds	—		4,410		—		4,410
Cash equivalents	831		6,410		—		7,241
U.S. Government agency bonds	14,977		5,504		—		20,481
Commercial paper	—		19,107		—		19,107
Corporate bonds	—		2,914		—		2,914
Marketable securities	14,977		27,525		—		42,502
Total financial assets	$	15,808	$	33,935	$	—	$	49,743


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	10,533	$	—	$	—	$	10,533
Cash equivalents	10,533		—		—		10,533
Total financial assets	$	10,533	$	—	$	—	$	10,533

There were no liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2021 and December 31, 2020.

The following table summarizes the cost, unrealized gains and losses and fair value of marketable securities (in thousands):


	December 31, 2021
	Amortized Cost		Unrealized Losses		Unrealized Gains		Fair Value
U.S. Government agency bonds	$	20,509	$	(28)	$	—	$	20,481
Corporate bonds	2,915		(1)		—		2,914
Commercial paper	19,102		—		5		19,107
Marketable securities	$	42,526	$	(29)	$	5	$	42,502
Amounts recognized on the consolidated balance sheet
Short-term marketable securities							31,561
Long-term marketable securities							10,941
Marketable securities							$	42,502

As of December 31, 2021, all of the marketable securities are classified as available for sale, in which short-term marketable securities mature within one year and long-term marketable securities mature in one to two years.

At December 31, 2021, accrued interest on marketable securities of $0.1 million was included in prepaid expenses and other current assets on the consolidated balance sheet.

The Company did not have marketable securities as of December 31, 2020.

Derivative liabilities include derivatives associated with the Company’s Success Fee Agreement with Oxford Finance LLC (Note 6) and the 2020 Notes derivative liability (Note 6).

The Company valued Success Fee derivative liability based on the Success Fee amount of $1.9 million and the probability and estimated timing of a liquidity event. The probability of occurrence of a Liquidity Event was estimated to be up to 65% before the expiration of the agreement as of December 31, 2019. Changes in the estimated probability may result in an increase or decrease in the fair value of the derivative liability. On October 5, 2020, the Success Fee derivative liability was settled upon the Company paying $1.9 million pursuant to the Success Fee Agreement to Oxford Finance LLC.

The Company valued the 2020 Notes derivative liability using the “with and without” methodology. The “with and without” methodology involves valuing the convertible note on an as is basis and then valuing the 2020 Notes without each individual embedded derivative. The difference between the value of the 2020 Notes with the embedded derivatives and the value without each individual embedded derivative equals the fair value of that embedded derivative. In April 2020, the Company valued the embedded derivatives using a Monte Carlo Simulation (“MCS”). The first step of each simulation was to forecast the Company’s Series G-1 convertible preferred stock price through the expiration of the 2020 Notes. In order to estimate the future share price of the Series G-1 convertible preferred stock, the Company applied a “random walk” model based upon a Geometric Brownian Motion process with a constant drift.

The fair value of the 2020 Notes derivative liability was determined using the following assumptions:


	April 17,
	2020
Risk-free interest rate	0.2		%
Current Series G-1 convertible preferred stock value per share	$	0.84
Series G-1 convertible preferred stock volatility	34.4		%

Upon the closing of the IPO in October 2020, the 2020 Notes converted pursuant to a qualified initial public offering (Note 6). As a result, the Company concluded that the 2020 Notes derivative had no value upon the closing of the IPO, because value of the notes with and without the such derivative was the same.

The change in fair value of the derivative liabilities is summarized below (in thousands):


	Success Fee Derivative Liability		2020 Notes Derivative Liability
Beginning fair value, January 1, 2020	$	1,165	$	—
Fair value at inception	—		3,900
Change in fair value	710		(3,900)
Payment of Success Fee	(1,875)		—
Ending fair value, December 31, 2020	$	—	$	—

- 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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