Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2021

The Company applies the fair value measurement accounting standard whenever other accounting pronouncements require or permit fair value measurements. Fair value is defined in the accounting standard as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:

•Level 1 - Quoted prices for identical instruments in active markets.

•Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level 3 - Instruments whose significant value drivers are unobservable.

On March 31, 2021, the Company’s Level 3 liabilities consisted of the Private Placement warrant liability. The determination of the fair value of warrant liability is discussed in Note 6.

On December 31, 2020, the Company’s Level 3 liabilities consisted of the redeemable convertible preferred stock warrant liability. The determination of the fair value of warrant liability is discussed in Note 6.

The following table provides information by level for the Company’s assets and liabilities that were measured at fair value on a recurring basis (in thousands):


	March 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	6,493	$	—	$	—	$	6,493
Total financial assets	$	6,493	$	—	$	—	$	6,493
Liabilities
Warrant liabilities	$	—	$	—	$	14,725	$	14,725
Total financial liabilities	$	—	$	—	$	14,725	$	14,725


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	10,493	$	—	$	—	$	10,493
Total financial assets	$	10,493	$	—	$	—	$	10,493
Liabilities
Warrant liabilities	$	—	$	—	$	49,293	$	49,293
Total financial liabilities	$	—	$	—	$	49,293	$	49,293

Money market funds are included within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

The fair value of the Private Placement warrant and redeemable convertible preferred stock warrant liabilities is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. In determining the fair value of the warrant liabilities, the Company used the Black-Scholes option pricing model to estimate the fair value using unobservable inputs including the expected term, expected volatility, risk-free interest rate and dividend yield (see Note 6).

The following table presents a summary of the changes in the fair value of the Company’s Level 3 financial instruments (in thousands):


	Redeemable Convertible Preferred Stock Warrant Liability		Private Placement Warrant Liability		Derivative Liability
Fair value as of January 1, 2020	$	(162)	$	—	$	—
Change in the fair value included in other income (expense), net	—		—		(5,308)
Fair value as of March 31, 2020	(162)		—		(5,308)

	Redeemable Convertible Preferred Stock Warrant Liability		Private Placement Warrant Liability		Derivative Liability
Fair value as of January 1, 2021	(49,293)		—		—
Private placement warrant liability acquired as part of the merger	—		(19,377)		—
Change in the fair value included in other income (expense), net	(8,804)		4,652		—
Issuance of preferred stock upon exercise of warrants	58,097		—		—
Fair value as of March 31, 2021	$	—	$	(14,725)	$	—

Disclosure of Fair Values

Our financial instruments that are not re-measured at fair value include accounts receivable, accounts payable, accrued and other current liabilities, convertible notes and debt. The carrying values of these financial instruments approximate their fair values.

- 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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