Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

4. Fair Value Measurements

The Company measures and reports certain financial instruments as assets at fair value.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date. Fair value measurement establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.

The Company determined the fair value of financial assets and liabilities using the fair value hierarchy that describes three levels of inputs that may be used to measure fair value, as follows:

Level 1—Quoted prices in active markets for identical assets and liabilities;

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices 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 assets or liabilities; and

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying value of cash and cash equivalents, prepaid expenses, accounts payable, and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments.

The following table summarizes the Company's financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

		June 30, 2022
		Total		Level 1		Level 2		Level 3
Money market funds		$	44,320	$	44,320	$	—	$	—
	Total cash equivalents		44,320		44,320		—		—
Corporate bonds			14,471		14,471		—		—
U.S. treasury securities			31,614		31,614		—		—
	Total short-term investments		46,085		46,085		—		—
U.S. treasury securities			5,805		5,805		—		—
	Total long-term investments		5,805		5,805		—		—
Total cash equivalents and investments		$	96,210	$	96,210	$	—	$	—

As of June 30, 2022, $135 thousand of accrued interest on investments was recorded to other assets on the condensed balance sheets.

		December 31, 2021
		Total		Level 1		Level 2		Level 3
Money market funds		$	38,067	$	38,067	$	—	$	—
	Total cash equivalents		38,067		38,067		—		—
Commercial paper			33,973		—		33,973		—
Corporate bonds			6,262		6,262				—
U.S. treasury securities			5,986		5,986		—		—
	Total short-term investments		46,221		12,248		33,973		—
Corporate bonds			8,436		8,436		—		—
U.S. treasury securities			24,023		24,023		—		—
	Total long-term investments		32,459		32,459		—		—
Total cash equivalents and investments		$	116,747	$	82,774	$	33,973	$	-

As of December 31, 2021, $135 thousand of accrued interest on investments was recorded to other assets on the condensed balance sheets.

The Company's assets and liabilities that are recorded at fair value on a recurring or non-recurring basis as of June 30, 2022 are described below.

For Level 1 investments, the Company uses quoted prices in active markets for identical assets to determine the fair value. For Level 2 investments, the Company uses quoted prices for similar assets sourced from certain third-party pricing services. The third-party pricing services generally utilize industry standard valuation models for which all significant inputs are observable, either directly or indirectly, to estimate the price or fair value of the securities. The primary input generally includes reported trades of or quotes on the same or similar securities. The Company does not make additional judgments or assumptions made to the pricing data sourced from the third-party pricing services.

The estimated fair value of the term loan was $4.7 million as of June 30, 2022 and was based on estimated interest rates currently available to the Company for debt with similar terms, a Level 3 input.