Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Fair Value MeasurementsFinancial 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 did not have short-term investments as of March 31, 2022 and December 31, 2021.

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


	As of March 31, 2022
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Money market funds	$	159,316	$	—	$	—	$	159,316
Payment-dependent notes receivable, current	243		—		—		243
Payment-dependent notes receivable, noncurrent	—		—		14,975		14,975
Total financial assets	$	159,559	$	—	$	14,975	$	174,534
Payment-dependent notes payable, current	243		—		—		243
Payment-dependent notes payable, noncurrent	—		—		14,975		14,975
Warrant liabilities	—		—		5,000		5,000
Public Warrants	30,654		—		—		30,654
Private Placement Warrants	—		12,262		—		12,262
Total financial liabilities	$	30,897	$	12,262	$	19,975	$	63,134


	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

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 the Private Placement Warrants within Level 2, because they were valued using quoted prices of an identical instrument. 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 March 31, 2022

Level 3 Measurements

Fair
Value

Valuation
Technique(s)

Significant
Unobservable
Input(s)

Range

Financial assets

Payment-dependent notes receivable

14,975

Transaction prices

N/A(1)

N/A

Financial liabilities

Payment-dependent notes payable

14,975

Transaction prices

N/A(1)

N/A

As of December 31, 2021

Level 3 Measurements

Fair
Value

Valuation
Technique(s)

Significant
Unobservable
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

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

The Company uses 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, other than Public and Private Placement Warrants. 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. Subsequent to the Merger, the Series B-1 preferred stock warrants and Junior preferred stock warrants were converted to common stock warrants. As a result, the Series B-1 preferred stock warrants were remeasured at fair value prior to the conversion resulting in a change in fair value of $106 recognized as a component of change in fair value of warrant liabilities within the condensed consolidated statements of operations and comprehensive (loss) income, and then settled in additional paid-in capital as a result of the conversion to equity-classified common stock warrants. The Junior Preferred Warrants (as defined below, see Note 11) were remeasured at fair value prior to the conversion, which did not result in a change in fair value for the three months ended March 31, 2022. These warrants will remain liability-classified, as the Company has an obligation to issue a variable number of shares of common stock for a fixed monetary amount of $5,000.

The Company estimated the fair value of the warrants' liability, other than Public and Private Placement Warrants, as of March 31, 2022 and December 31, 2021, respectively, using the following key assumptions:


	As of
	March 31, 2022		December 31, 2021

Fair value of underlying securities	$	33.9	$	30.8
Discounts for lack of marketability	0.0%		0.0%
Expected term (years)	3.6		3.4 – 8.8
Expected volatility	44.3%		40.4% – 44.3%
Risk-free interest rate	2.4%		1.0% – 1.5%
Expected dividend yield	0.0%		0.0%
Fair value per warrant	23.2		$5.0 - $22.0

The Company performed calculation of the fair value of Junior Preferred Warrants as of March 31, 2022 based on the assumptions noted above, however the total warrant liability associated with the Junior Preferred Warrants has not changed, as the Company's obligation to issue a variable number of shares of common stock is limited to a maximum fixed fair value amount of $5,000.

The Public Warrants were valued as of March 31, 2022 using the listed trading price of $1.66 per public warrant.

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 a company going public and listing on a national securities exchange. During the three months ended March 31, 2022 there were no transfers of securities into or out of Level 3. During the three months ended March 31, 2021, 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 acquirer, and the Company was able to obtain independent market-quoted prices for the acquirer company.

The following tables provide reconciliation for all financial assets measured at fair value using significant unobservable inputs (Level 3) for three months ended March 31, 2022 and 2021:


Balance as of December 31, 2020	$	51,859
Acquisition of short-term investments	362
Change in fair value of short-term investments	(23)
Short-term investments transferred out of Level 3 to Level 1	(339)
Change in fair value of payment-dependent notes receivable	21,309
Settlement of payment-dependent notes receivable	(261)
Balance as of March 31, 2021	$	72,907


Balance as of December 31, 2021	$	13,453
Change in fair value of payment-dependent notes receivable	1,522


Balance as of March 31, 2022	$	14,975

The following tables provide reconciliation for payment-dependent notes payable measured at fair value using significant unobservable inputs (Level 3) for three months ended March 31, 2022 and 2021:


Balance as of December 31, 2020	$	51,859
Change in fair value of payment-dependent notes payable	21,309
Settlement of payment-dependent notes payable	(261)
Balance as of March 31, 2021	$	72,907


Balance as of December 31, 2021	$	13,453
Change in fair value of payment-dependent notes payable	1,522


Balance as of March 31, 2022	$	14,975

The following tables provide reconciliation for warrant liabilities measured at fair value using significant unobservable inputs (Level 3) for three months ended March 31, 2022 and 2021:


Balance as of December 31, 2020	$	1,780
Change in fair value of warrant liabilities	908
Balance as of March 31, 2021	$	2,688


Balance as of December 31, 2021	$	7,844
Change in fair value of warrant liabilities	106
Settlement of the warrant liability via conversion to equity-classified common stock warrants	(2,950)
Balance as of March 31, 2022	$	5,000

- 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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