Fair Value Measurements

12 Months Ended

Dec. 31, 2020

3. Fair Value Measurements

The following table presents the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2020 (in thousands):

		As of December 31, 2020
	Valuation	Amortized		Unrealized		Unrealized
	Hierarchy	Cost		Gains		Losses			Fair Value
Money market funds	Level 1	$	46,134	$	—	$	—		$	46,134
Commercial paper	Level 2		76,605		—		(2	)		76,603
Agency bonds	Level 2		29,654		15		—			29,669
Corporate debt securities	Level 2		11,890		—		(6	)		11,884
U.S. government bonds	Level 2		7,093		—		—			7,093
Municipal bonds	Level 2		5,592		2		(1	)		5,593
U.S. treasury bills	Level 2		4,680		—		—			4,680
Agency discount securities	Level 2		200		—		—			200
Total cash equivalents and available-for-sale securities		$	181,848	$	17	$	(9	)	$	181,856
Classified as:
Cash equivalents									$	75,410
Short-term investments										106,446
Total cash equivalents and available-for-sale securities									$	181,856

The following table summarizes the Company’s cash equivalents and available-for-sale securities by contractual maturity as of December 31, 2020 (in thousands):

	As of December 31, 2020
Within one year	$	160,304
After one year through two years		21,552
Total cash equivalents and available-for-sale securities	$	181,856

The Company did not hold any financial assets as of December 31, 2019.

The Company’s convertible preferred stock liability represented a Level 3 financial liability measured at fair value on a recurring basis prior to its extinguishment in the fourth quarter of 2019. Accordingly, there was no Level 3 financial liability outstanding during the year ended and as of December 31, 2020.

For the year ended December 31, 2019, changes in the fair value of the Company’s Level 3 financial liability measured on a recurring basis were as follows (in thousands):

	Year Ended December 31,
	2019
Beginning balance	$	1,671
Revaluation of convertible preferred stock liability recorded in other expenses (income), net		30,597
Partial settlement of convertible preferred stock liability upon third closing		(6,673	)
Capital contribution related to extinguishment of preferred stock liability		(25,595	)
Ending balance	$	—

The Company’s convertible preferred stock liability resulted from the initial sale of Series A convertible preferred stock where the investors’ committed to purchase additional shares of Series A convertible preferred stock in subsequent closings, contingent upon the achievement by the Company of certain development milestones and approval by the board of directors. The investors’ commitment to purchase and the Company’s commitment to sell shares of Series A convertible preferred stock represented a freestanding instrument accounted for at fair value and re-measured at each reporting date. The Company estimated the fair value of this commitment using the Black Scholes option pricing model using the following assumptions:

	Year Ended
	December 31,
	2019
Stock price	$0.99-$2.57
Exercise price	$1.00
Expected term (years)	0.00-2.25
Expected volatility		72.0	%
Risk-free interest rate	0.0-2.4%

- 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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