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Fair Value Measurements

9 Months Ended

Sep. 30, 2020

Fair Value MeasurementsASC Topic 820, Fair Value Measurement, establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, as follows: Level 1 Inputs - unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date; Level 2 Inputs - other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3 Inputs - unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

Assets and liabilities measured at fair value on a recurring basis as of September 30, 2020 are as follows:


	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market funds	$	3,961	$	3,961	$	—	$	—

Short-term investments:
Commercial paper	14,943		—		14,943		—
Corporate notes/bonds	44,126		—		44,126		—
U.S. Treasuries	2,265		—		2,265		—
U.S. government agency securities	1,287		—		1,287		—
Total financial assets	$	66,582	$	3,961	$	62,621	$	—

Liabilities
Common stock warrant liability	$	71	$	—	$	—	$	71
Total financial liabilities	$	71	$	—	$	—	$	71

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 are as follows:


	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market funds	$	31,078	$	31,078	$	—	$	—
Commercial paper	2,498		—		2,498		—
Short-term investments:
Commercial paper	11,433		—		11,433		—
Corporate notes/bonds	36,597		—		36,597		—
U.S. Treasuries	4,512		—		4,512		—
U.S. government agency securities	9,784		—		9,784		—
Total financial assets	$	95,902	$	31,078	$	64,824	$	—

Liabilities
Common stock warrant liability	$	414	$	—	$	—	$	414
Total financial liabilities	$	414	$	—	$	—	$	414

The Company uses the market approach and Level 1 and Level 2 inputs to value its cash equivalents and Level 2 inputs to value its short-term investments. The Company’s long-term debt bore interest at the prevailing market rates for instruments with similar characteristics and, accordingly, the carrying value for this instrument also approximates its fair value and the financial measurement is also classified within Level 2 of the fair value hierarchy.

The Company’s common stock warrant liability (refer to Note 8, Stockholders’ Equity, for more information) is classified within Level 3 of the fair value hierarchy. The fair value of the common stock warrant liability was determined using the Black-Scholes option-pricing model.

The fair value of the common stock warrant liability is based significantly on the fair value of the Company’s common stock. At the date of issuance, the common stock warrant liability was determined using the following

weighted-average assumptions: expected term of 2.0 years, risk-free interest rate of 1.53%, expected volatility of 78.97%, and no expected dividends.

The following weighted-average assumptions were used to estimate the fair value of the common stock warrant liability at September 30, 2020:


	September 30, 2020
Expected term	0.5 years
Risk-free interest rate	0.1	%
Expected volatility	88.97	%
Expected dividend yield	—	%

A 10% change in the estimate of expected volatility at September 30, 2020 would increase or decrease the fair value of the common stock warrant liability in the amount of $17. A 10% change in the estimate of fair value of the common stock at September 30, 2020 would increase or decrease the fair value of the common stock warrant liability in the amount of $24.

The following is a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) for the three months ended September 30, 2020:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Common Stock Warrant Liability
Balance at December 31, 2019	$	414
Additions
Gain included in other income (expense), net	(343)
Balance at September 30, 2020	$	71

- 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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