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Financial Instruments and Fair Value Measurements

9 Months Ended

Sep. 30, 2020

Financial Instruments and Fair Value Measurements

3. Financial Instruments and Fair Value Measurements

As of September 30, 2020, our cash equivalent investments consisted of money market funds with a fair value of $213.3 million, which are valued using level 1 inputs. The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2019:

	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
U.S. Treasury securities	$	43,245	$	—	$	—	$	43,245
Money market funds		29,386		—		—		29,386
Reverse repurchase agreements		—		10,000		—		10,000
Commercial paper		—		6,958		—		6,958
Corporate bonds		—		8,096		—		8,096
Total assets	$	72,631	$	25,054	$	—	$	97,685

The Company’s convertible preferred stock warrants were converted into common stock warrants upon the closing of an initial public offering of the Company’s common stock (“IPO”) in March 2019. The change in the fair value of the warrant liability for the three months ended March 31, 2019 is summarized below (in thousands):

Balance at December 31, 2018	$	313
Change in fair value of warrant liability		609
Net exercise of warrants		(133	)
Conversion of Series A preferred stock warrants to common stock warrants upon the closing of the IPO		(789	)
Balance at March 31, 2019	$	—

The valuation of the Company’s convertible preferred stock warrant liability contains unobservable inputs that reflect the Company’s own assumptions for which there is little, if any, market activity for at the measurement date. Accordingly, the Company’s convertible preferred stock warrant liability is measured at fair value on a recurring basis using unobservable inputs and are classified as Level 3 inputs, and any change in fair value is recognized as change in fair value of warrant liability in the condensed consolidated statements of operations and comprehensive loss.

The fair value of the warrants was determined using the Black-Scholes option pricing model and the following assumptions:

	March 31, 2019
Expected term (in years)		5.3
Expected volatility	43.9%
Risk-free interest rate	2.5%
Expected dividend yield	0%

- 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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