Fair Value Measurements

6 Months Ended

Jun. 30, 2020

4.	Fair Value Measurements

The Company measures and reports its cash equivalents, restricted cash, warrant liabilities and securities issuance obligation at fair value. The following table sets forth the fair value of the Company’s financial assets measured on a recurring basis by level within the fair value hierarchy:


	June 30, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial Assets
Money market funds	$	120,977	$	—	$	—	$	120,977
Restricted money market funds		300		—		—		300
Total financial assets	$	121,277	$	—	$	—	$	121,277


	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial Assets
Money market funds	$	146,240	$	—	$	—	$	146,240
Restricted money market funds		300		—		—		300

Total financial assets	$	146,540	$	—	$	—	$	146,540

Financial Liabilities
Warrant liabilities	$	—	$	—	$	45,935	$	45,935
Securities issuance obligation		—		—		10,485		10,485

Total financial liabilities	$	—	$	—	$	56,420	$	56,420

Money market funds and restricted money market funds are measured at fair value on a recurring basis using quoted prices and are classified as a Level 1 input.

The Company’s warrant liabilities and securities issuance obligation contained unobservable inputs that reflected the Company’s own assumptions in which there was little, if any, market activity at the measurement date. Accordingly, the Company’s warrant liabilities were measured at fair value on a recurring basis using unobservable inputs until such time the warrants were no longer considered derivative instruments. The changes in fair value of warrant liabilities were recognized as a component of other income (expense), net in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2020. The securities issuance obligation was measured at fair value on a recurring basis using unobservable inputs until the common stock and the common stock warrant were issued. The change in fair value of the securities issuance obligation was recognized as research and development expense in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2020. The warrant liabilities and the securities issuance obligation were classified as Level 3 inputs.

The assumptions used in calculating the estimated fair values represented the Company’s best estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.

At January 22, 2020, Warrant A and Warrant B were no longer considered to be derivative instruments. The Company remeasured the fair value of the warrant liabilities at the time of reclassification to equity using the following assumptions:


	Series A Warrant			Series B Warrant
Expected term (in years)		5.0			2.1
Expected volatility		43	%		88	%
Risk-free interest rate		1.57	%		1.53	%
Expected dividend yield		—	%		—	%

At January 31, 2020, the securities issuance obligation was settled by the issuance of common stock and a common stock warrant. The Company remeasured the fair value of its common stock issuance obligation based on the value of the common stock at the time of issuance. The warrant issuance obligation was remeasured using the following assumptions:


	Warrant Issuance Obligation
Expected term (in years)		5.0
Expected volatility		43	%
Risk-free interest rate		1.57	%
Expected dividend yield		—	%

The following table provides a summary of changes in the estimated fair values of the Company’s Level 3 financial liabilities:


	Series A Warrant Liability			Series B Warrant Liability			Warrant Issuance Obligation			Common Stock Issuance Obligation			Total
	(in thousands)
Balance, December 31, 2019	$	32,616		$	13,319		$	3,036		$	7,449		$	56,420
Changes in fair value		11,597			4,643			152			1,333			17,725
Settlement of financial liabilities by securities issuance		—			—			(3,188	)		(8,782	)		(11,970	)
Reclassification to equity		(44,213	)		(17,962	)		—			—			(62,175	)

Balance, June 30, 2020	$	—		$	—		$	—		$	—		$	—

There were no transfers between Levels 1, 2 or 3 during the six months ended June 30, 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.

+ References + Details