On February 8, 2019, the Company entered into a note purchase agreement (“2019 Note Purchase Agreement”) for the sale of up to $4.0 million in convertible promissory notes to certain related parties. In February and June 2019, the Company issued unsecured convertible promissory notes in an aggregate principal amount of $4.0 million (the “2019 Notes”).

On February 7, 2020, the Company entered into a note purchase agreement (“2020 Note Purchase Agreement”) for the sale of up to $2.5 million in convertible promissory notes to certain related parties. In February 2020, the Company issued unsecured convertible promissory notes in an aggregate principal amount of $1.5 million (the “February 2020 Notes”). In June 2020, the Company issued unsecured convertible promissory notes in an aggregate principal amount of $1.0 million (the “June 2020 Notes,” and together with the February 2020 Notes, the “2020 Notes”).

The 2019 Notes and the 2020 Notes (and together the “Convertible Notes”) accrued interest at 8.0% per annum. The Company incurred interest expense in connection with the Convertible Notes of $0.2 million for the year ended December 31, 2020. In February 2020, the maturity date of the 2019 Notes was extended to November 7, 2020. The amendment of the 2019 Notes was accounted for as a modification, which required prospective consideration of the revised terms. The Company elected the fair value option to account for the Convertible Notes. For year ended December 31, 2020, the Company recognized $1.7 million of increase in fair value of convertible promissory notes – related party. The fair value of the convertible promissory notes was estimated using a scenario-based analysis that estimated the fair value of the convertible promissory notes based on the probability-weighted present value of expected future investment returns, considering possible outcomes available to the noteholders. The assumptions used to determine the fair value of the convertible promissory notes at issuance in 2020 and upon conversion included an estimated 85% to 100% probability of conversion of the promissory notes at a 20% discount, an assumed discount rate of 25%, and an estimated time to settlement of up to 0.4 years.

In connection with the Company’s Series Seed 2 preferred stock financing in June 2020, the Convertible Notes converted into 2,036,158 shares of Series Seed 2 convertible preferred stock at a conversion price of $3.408 per share, which is 80% of the price paid by investors in the Series Seed 2 financing. At the date of conversion, the outstanding principal and accrued interest on the Convertible Notes were $6.5 million and $0.4 million, respectively. The $8.7 million aggregate carrying value of the Convertible Notes, including the $8.3 million fair value and $0.4 million of accrued interest, was reclassified to the carrying value of the Series Seed 2 convertible preferred stock into which they converted in June 2020.

The following table provides a reconciliation of convertible promissory notes for the year ended December 31, 2020:


	Convertible Promissory Notes
Balance at December 31, 2019	$	4,000
Issuance of convertible promissory notes		2,500
Increase in fair value of convertible promissory notes		1,735
Conversion of promissory notes		(8,235	)
Balance at December 31, 2020	$	—