Fair Value Measurements

12 Months Ended

Dec. 31, 2021

3.	Fair Value Measurements

Financial instruments consist of cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, payment-dependent notes receivable, payment-dependent notes payable, and warrant liabilities. Cash equivalents, payment-dependent notes receivable, payment-dependent notes payable, and warrant liabilities are stated at fair value on a recurring basis. Restricted cash, accounts receivable, accounts payable, and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date. The Company does not have short-term investments as of December 31, 2021 and 2020.

The following tables present the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis:


	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Money market funds	$	24,240	$	—	$	—	$	24,240
Payment-dependent notes receivable, current		1,153		—		—		1,153
Payment-dependent notes receivable, noncurrent		—		—		13,453		13,453
Total financial assets	$	25,393	$	—	$	13,453	$	38,846
Payment-dependent notes payable, current		1,153		—		—		1,153
Payment-dependent notes payable, noncurrent		—		—		13,453		13,453
Warrant liabilities		—		—		7,844		7,844
Total financial liabilities	$	1,153	$	—	$	21,297	$	22,450

	As of December 31, 2020
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Money market funds	$	6,050	$	—	$	—	$	6,050
Payment-dependent notes receivable, current		1,165		—		38,124		39,289
Payment-dependent notes receivable, noncurrent		—		—		13,735		13,735
Total financial assets	$	7,215	$	—	$	51,859	$	59,074
Payment-dependent notes payable, current		1,165		—		38,124		39,289
Payment-dependent notes payable, noncurrent		—		—		13,735		13,735
Warrant liabilities		—		—		1,780		1,780
Total financial liabilities	$	1,165	$	—	$	53,639	$	54,804

The Company classifies money market funds and certain payment-dependent notes receivable and payment-dependent notes payable within Level 1 of the fair value hierarchy because the Company values these investments using quoted market prices.

The Company classifies certain payment-dependent notes receivable and payment-dependent notes payable within Level 3 of the fair value hierarchy if the underlying securities are equity of private companies whose regular financial and nonfinancial information is generally not available other than when it is publicly disclosed, or significant unobservable inputs are used to estimate fair value.

The following tables summarize the quantitative inputs and assumptions used for the Company’s payment-dependent notes receivable and payment-dependent notes payable classified as Level 3 of the fair value hierarchy:


As of December 31, 2021
				Significant
	Fair		Valuation	Unobservable
Level 3 Measurements	Value		Technique(s)	Input(s)	Range
Financial assets
Payment-dependent notes receivable	$	13,453	Transaction prices	N/A⁽¹⁾	N/A
Financial liabilities
Payment-dependent notes payable	$	13,453	Transaction prices	N/A⁽¹⁾	N/A


As of December 31, 2020
				Significant
	Fair		Valuation	Unobservable
Level 3 Measurements	Value		Technique(s)	Input(s)	Range
Financial assets
Payment-dependent notes receivable	$	13,735	Transaction prices	N/A⁽¹⁾	N/A
	$	38,124	Discounted transaction prices⁽²⁾	Discount for lack of marketability	5	%
Financial liabilities
Payment-dependent notes payable	$	13,735	Transaction prices	N/A⁽¹⁾	N/A
	$	38,124	Discounted transaction prices⁽²⁾	Discount for lack of marketability	5	%

(1)	The Company considers completed transactions made through the Company’s platform for the relevant private securities as relevant data inputs.

(2)	The Company uses publicly traded share prices at the close of the valuation date as the primary factor in the fair value analysis and applies a discount to the share prices to reflect lack of marketability.

The Company used a hybrid method that incorporates the Black-Scholes option-pricing model and an adjusted backsolve model to estimate the fair value of the warrant liabilities. This approach is a scenario- based analysis that considers many assumptions, including the likelihood of potential liquidity events, the nature and timing of such potential events, actions taken with regard to the warrants at expiration, as well as discounts for lack of marketability of the underlying securities and warrants.

The Company estimated the fair value of the warrants liability as of December 31, 2021 and 2020, respectively, using the following key assumptions:

	As of December 31,
	2021		2020
Fair value of underlying securities		$30.8		$12.4
Discounts for lack of marketability		0.0%		29.0% – 34.0%
Expected term (years)		3.4 – 8.8		4.4 – 9.8
Expected volatility		40.4% – 44.3%		39.9% – 41.8%
Risk-free interest rate		1.0% – 1.5%		0.3% – 0.9%
Expected dividend yield		0.0%		0.0%
Fair value per warrant		$5.0 – $22.0		$1.5 – $1.9

The Company transfers financial instruments out of Level 3 on the date when underlying input parameters are readily observable from existing market quotes. Transfers from Level 3 to Level 1 generally relate to an investee company going public and listing on a national securities exchange.

During the years ended December 31, 2021 and 2020, there were transfers of securities segregated for customers from Level 3 to Level 1, as one private company was acquired by a public company and became publicly-traded under the acquiror, and the Company was able to obtain independent market-quoted prices for the acquiror company.

The following table provides reconciliation for all financial assets measured at fair value using significant unobservable inputs (Level 3) for years ended December 31, 2021 and 2020:


Balance as of December 31, 2019	$	25,892
Change in fair value of short-term investments		11
Distribution of short-term investments		(136)
Change in fair value of payment-dependent notes receivable.		27,319
Payment-dependent notes receivable transferred out of Level 3 to Level 1		(1,165)
Settlement of payment-dependent notes receivable		(62)
Balance as of December 31, 2020	$	51,859
Change in fair value of payment-dependent notes receivable		29,364
Payment-dependent notes receivable transferred out of Level 3 to Level 1		(62,637)
Settlement of payment-dependent notes receivable		(5,133)
Balance as of December 31, 2021	$	13,453

The following table provides reconciliation for payment-dependent notes payable measured at fair value using significant unobservable inputs (Level 3) for years ended December 31, 2021 and 2020:


Balance as of December 31, 2019	$	25,767
Change in fair value of payment-dependent notes payable		27,319
Payment-dependent notes payable transferred out of Level 3 to Level 1		(1,165)
Settlement of payment-dependent notes payable		(62)
Balance as of December 31, 2020	$	51,859
Change in fair value of payment-dependent notes payable		29,364
Payment-dependent notes payable transferred out of Level 3 to Level 1		(62,637)
Settlement of payment-dependent notes payable		(5,133)
Balance as of December 31, 2021	$	13,453

The following table provides reconciliation for warrant liabilities measured at fair value using significant unobservable inputs (Level 3) for years ended December 31, 2021 and 2020:


Balance as of December 31, 2019	$	—
Fair value of warrant at issuance		1,488
Change in fair value of warrant liabilities		292
Balance as of December 31, 2020	$	1,780
Change in fair value of warrant liabilities		6,064
Balance as of December 31, 2021	$	7,844

- 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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