Fair Value Measurements

9 Months Ended

Sep. 30, 2021

4.	Fair value measurements

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

●	Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities.

●

Level 2 — Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.

●	Level 3 — Inputs are unobservable for the asset or liability.

The following table sets forth the Company’s liabilities that were measured at fair value on a recurring basis by level within the fair value hierarchy:


(in thousands)
Balance as of December 31, 2020	Level 1		Level 2		Level 3		Total
Liabilities:
Convertible preferred stock warrant liability	$	—	$	—	$	3,911	$	3,911
Total liabilities	$	—	$	—	$	3,911	$	3,911

The convertible preferred stock warrant liability related to warrants issued in connection with loan and security agreements entered into in September 2014, as amended in July 2015, in May 2016 and in September 2019. These warrants were originally issued to purchase shares of Series F-2 convertible preferred stock and Series G convertible preferred stock (“Series G Preferred Shares”). In connection with the closing of the initial public offering (“IPO”), these convertible preferred stock warrants became warrants to purchase 108,406 shares of common stock and were reclassified to equity.

The convertible preferred stock warrant liability also related to a warrant issued to Biosense Webster, Inc. (“BWI”), an affiliate of Johnson & Johnson Innovation — JJDC, Inc., to purchase Series G Preferred Shares with an exercise price of $0.01 per share. In connection with the closing of the IPO, the BWI warrant to purchase Series G Preferred Shares became exercisable to purchase 607,725 shares of common stock at an exercise price of $0.16 per share.

The Company’s recurring fair value measurements using significant unobservable inputs (Level 3) related solely to the Company’s convertible preferred stock warrant liability. The convertible preferred stock warrant liability was remeasured at each financial reporting period with any changes in fair value being recognized as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. In connection with the closing of the IPO, all of the outstanding convertible preferred stock warrants were converted to common stock warrants. The related liability was remeasured at the time of the IPO and reclassed to additional paid-in capital.

The fair value of the convertible preferred stock warrant liability was determined using the Black-Scholes option pricing model with the following inputs during the nine months ended:

The following table sets forth a summary of changes in the estimated fair value of the Company’s convertible preferred stock warrants during the nine months ended:


	September 30,
(in thousands)	2021		2020
Beginning of the period	$	3,911	$	3,540
Change in fair value		13,294		(17)
Conversion to common stock warrants		(17,205)		—
End of the period	$	—	$	3,523

There were no transfers in or out of Level 1, Level 2 or Level 3 fair value measurements during the periods ended September 30, 2021 and 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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