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Fair Value of Financial Assets and Liabilities
12 Months Ended
Dec. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value of Financial Assets and Liabilities

3. Fair Value of Financial Assets and Liabilities

The following table presents information about the Company’s financial instruments that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the inputs the Company utilized to determine such fair value (in thousands):

 

 

 

December 31, 2021

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (cash equivalents)

 

$

10,319

 

 

$

10,319

 

 

$

 

 

$

 

Marketable securities

 

 

225,357

 

 

 

27,186

 

 

 

198,171

 

 

 

 

Total financial assets measured at fair value

 

$

235,676

 

 

$

37,505

 

 

$

198,171

 

 

$

 

 

 

 

December 31, 2020

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (cash equivalents)

 

$

13,943

 

 

$

13,943

 

 

$

 

 

$

 

Marketable securities

 

 

131,899

 

 

 

11,169

 

 

 

120,730

 

 

 

 

Total financial assets measured at fair value

 

$

145,842

 

 

$

25,112

 

 

$

120,730

 

 

$

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Contingent stock liability

 

$

373

 

 

$

 

 

$

 

 

$

373

 

Total financial liabilities measured at fair value

 

$

373

 

 

$

 

 

$

 

 

$

373

 

 

The contingent stock liability in the table above represents the fair value of contingent equity consideration equal to 65,186 shares of common stock contingently issuable to the University of Louisville Research Foundation Inc. (ULRF) in connection with its amended and restated exclusive license agreement with the Company (see Note 8). In conjunction with the Company's IPO, the Company issued 48,889 shares of common stock and paid the cash equivalent fair value of 16,297 shares, or $0.3 million, to ULRF in May 2021 (see note 8). A rollforward of the contingent common stock liability, which is measured at fair value for the years ended December 31, 2021 and 2020, is represented as follows (in thousands):

 

Fair value as of January 1, 2020

 

$

63

 

Change in fair value

 

 

310

 

Fair value as of December 31, 2020

 

 

373

 

Change in fair value

 

 

735

 

Share issuance in partial settlement of contingent stock

 

 

(831

)

Cash payment in partial settlement of contingent stock

 

 

(277

)

Fair value as of December 31, 2021

 

$

 

 

Valuation techniques used to measure fair value maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Prior to the Company’s IPO, the Company’s contingent stock liability was classified within Level 3 of the fair value hierarchy because its fair value measurement is based, in part, on significant inputs not observed in the market, which incorporates assumptions and estimates to value the Company’s common stock. As there was no public market for the Company’s common stock prior to May 2021, the estimated fair value was determined by the Company’s board of directors with input from management, considering the most recently available third-party valuations of common stock, and the board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of each valuation. Historically, these third-party valuations of the Company’s common stock were performed contemporaneously when events occurred which management believed would have an impact on the valuation of the Company. The Company’s common stock valuation was prepared using the option-pricing method, (“OPM”), which uses a market approach to estimate enterprise value. The fair value of the Company’s common stock used to value the contingent stock liability as of December 31, 2020 was $5.72. The Company's IPO price of $17.00 was used to determine the contingent stock value prior to settlement in cash and share issuance.