Fair Value Measurements

12 Months Ended

Dec. 31, 2021

3. Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company classified its money market funds within Level 1 because their fair values are based on their quoted market prices. The Company had no financial assets or liabilities measured at fair value on a recurring basis as of December 31, 2020.

A summary of the assets that are measured at fair value as of December 31, 2021 is as follows (in thousands):


	December 31, 2021
	Total		Level 1		Level 2		Level 3
Assets
Money market funds(1)	$	101,561	$	101,561	$	—	$	—
Total assets measured at fair value	$	101,561	$	101,561	$	—	$	—

(1) Money market funds with maturities of 90 days or less at the date of purchase are included within cash and cash equivalents in the accompanying consolidated balance sheets and are recognized at fair value.

The following table presents a roll-forward of the fair value of the convertible note and preference shares tranche obligations for which fair value is determined by Level 3 inputs (in thousands):


	Preference Shares Tranche Obligations			Convertible Note			Total
Balance, January 1, 2020	$	—		$	8,663		$	8,663
Fair value adjustments		—			1,985			1,985
Currency exchange		—			(375	)		(375	)
Conversion into class B preference shares		—			(10,273	)		(10,273	)
Balance at December 31, 2020		—			—			—
Addition in cash on issuance of class C preference shares		2,425			—			2,425
Fair value adjustments through statement of operations		26,830			—			26,830
Currency exchange		(979	)		—			(979	)
Settlement of preference shares tranche obligation through issuance of preference shares		(28,276	)		—			(28,276	)
Balance at December 31, 2021	$	—		$	—		$	—

Valuation techniques used to measure fair value maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Our convertible notes are classified within Level 3 of the fair value hierarchy because the fair value measurement is based, in part, on significant inputs not observed in the market.

In July 2019, we issued convertible notes to existing related party investors for proceeds of $9.0 million. Upon issuance, we elected the fair value option to account for the convertible notes, with any subsequent changes in fair value being recognized through the statements of operations as other income (expense) until the convertible notes are settled. We have not recorded interest expense separate from those fair value adjustments.

The convertible notes accrued interest at 8% per year beginning in August 2019 payable in cash or, at the investor’s discretion, into our class B or class C preference shares. In April 2020, the convertible notes plus accrued interest of $0.5 million, were converted according to the terms of the convertible notes into 142,437 shares of class B preference shares (Note 8).

Our class C Preference Shares Tranche Obligation was measured at fair value using a Black-Scholes option pricing valuation methodology. The fair value of class C Preference Shares Tranche Obligation includes inputs not observable in the market and thus represents a Level 3 measurement. The option pricing valuation methodology utilized requires inputs based on certain subjective assumptions, including (i) expected stock price volatility, (ii) calculation of an expected term, (iii) a risk-free interest rate, and (iv) expected dividends. The assumptions utilized to value the class C Preference Shares Tranche Obligation during 2021 were (i) expected stock price volatility of 73.7%; (ii) remaining term of 0.3 years; (iii) a risk-free interest rate of 0.05%; and (iv) an expectation of no dividends.

There were no transfers among Level 1, Level 2 or Level 3 categories in the years ended December 31, 2021 and 2020.

- 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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