Fair Value Measurements

6 Months Ended

Jun. 30, 2022

4. Fair Value Measurements

Assets and liabilities recorded at fair value in the condensed financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3—Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis – The following assets and liabilities are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021:


	June 30, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds(1)	$	98,008	$	—	$	—	$	98,008
Total	$	98,008	$	—	$	—	$	98,008


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds(1)	$	105,220	$	—	$	—	$	105,220
Total	$	105,220	$	—	$	—	$	105,220
Liabilities:
Derivative liability	$	—	$	—	$	173	$	173
Total	$	—	$	—	$	173	$	173

(1) Money market funds are included in cash and cash equivalents in the condensed balance sheets as of June 30, 2022 and December 31, 2021.

On April 29, 2022, in connection with the refinancing of its long-term debt, the Company repaid the outstanding principal and interest under its term loan facility with CRG Group LP (“CRG”) which also extinguished the embedded derivative liability.

The change in fair value of the derivative liability was $0.2 million and $0.1 million in the three and six months ended June 30, 2022, and was recorded as a component of other expense, net in the condensed statement of operations and comprehensive loss. There was no adjustment to the fair value of the derivative liability recognized in net loss for the three and six months ended June 30, 2021.

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


	Derivative liability
Fair value as of January 1, 2022	$	173
Change in fair value included in other expense, net		(173	)
Fair value as of June 30, 2022	$	—

There were no assets or liabilities measured at fair value on a nonrecurring basis as of June 30, 2022 and December 31, 2021.