Fair Value Measurement

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurement

3 – FAIR VALUE MEASUREMENT

The following tables set forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy that are measured at fair value on a recurring basis:

	June 30, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Money market funds	$	80,045	$	—	$	—	$	80,045
Total assets	$	80,045	$	—	$	—	$	80,045

	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Money market funds	$	4,003	$	—	$	—	$	4,003
Total assets	$	4,003	$	—	$	—	$	4,003
Liabilities:
Series B preferred stock tranche right liability	$	—	$	—	$	300	$	300
Total liabilities	$	—	$	—	$	300	$	300

VALUATION OF SERIES B PREFERRED STOCK TRANCHE RIGHT LIABILITY

The series B preferred stock tranche right liability at December 31, 2019 is composed of the fair value of rights to purchase series B redeemable convertible preferred stock, or Series B. The fair value of the series B preferred stock tranche right liability was determined based on significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy. The fair value of the preferred stock tranche right liability was determined using a binomial model, which considered as inputs the value of the Series B, the expected return of the underlying Series B during the period between the valuation date and the expected event date, the probability and timing of achieving the specified milestones as of each valuation date and a discount rate. The most significant assumption in the binomial model impacting the fair value of the series B preferred stock tranche right liability is the fair value of the Company’s Series B as of each measurement date. The Company determines the fair value per share of the underlying Series B by taking into consideration the most recent sales of its Series B, results obtained from third-party valuations and additional factors the Company deems relevant. At December 31, 2019, the fair value of each share of Series B was $2.20 per share. The series B preferred stock tranche right was exercised on January 14, 2020. The change in fair value of the series B preferred stock tranche right liability from December 31, 2019 to January 14, 2020 was not material.

The following table provides a roll-forward of the aggregate fair value of the Company’s series B preferred stock tranche right liability, for which fair value is determined using Level 3 inputs:

	Series B Preferred Stock Tranche Right Liability
	(in thousands)
Balance as of December 31, 2019	$	300
Exercise of series B preferred stock tranche right		(300	)
Balance as of June 30, 2020	$	—

VALUATION OF CONVERTIBLE LOAN NOTES

The Company elected the fair value option to account for its convertible loan notes issued during April 2020. The fair value of the convertible loan notes was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

The fair value of the initial closing of the Company’s convertible loan notes in April 2020 was determined to be equal to the proceeds of $10.0 million on issuance. The fair value of the convertible loan notes at the time of conversion into the Series C preferred stock in June 2020 was determined to be equal to $1.6016 per share, the value of the Company’s Series C preferred stock into which the convertible loan notes were converted. The change in fair value of the convertible notes prior to close of the Series C preferred stock financing of $0.1 million primarily related to the accrued interest earned on the convertible loan notes prior to such financing.

The following table presents a roll-forward of the aggregate fair values of the Company’s convertible loan notes (Note 5) for which fair value is determined by Level 3 inputs:

	Convertible Loan Notes
	(in thousands)
Balance as of December 31, 2019
Initial fair value	$	10,000
Change in fair value plus accrued interest		83
Settlement of convertible loan notes		(10,083	)
Balance as of June 30, 2020	$	—