Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

(9) Fair Value Measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market.

When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

• Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

• Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The following table sets forth the Company’s financial assets and liabilities that were measured at fair value, on a recurring basis (in thousands):

	As of March 31, 2022
	Level 1		Level 2		Level 3		Total
Financial Assets
Cash and cash equivalents:
Money market funds	$	21,045	$	—	$	—	$	21,045
Total assets	$	21,045	$	—	$	—	$	21,045
Financial Liabilities
Private placement warrant liability	$	—	$	—	$	1,808	$	1,808
Total liabilities	$	—	$	—	$	1,808	$	1,808

	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
Financial Assets
Cash and cash equivalents:
Money market funds	$	26,031	$	—	$	—	$	26,031
Total assets	$	26,031	$	—	$	—	$	26,031
Financial Liabilities
Debt derivative liabilities	$	—	$	—	$	26,189	$	26,189
Total liabilities	$	—	$	—	$	26,189	$	26,189

The fair value of accounts receivable, accounts payable, and accrued expenses approximated their carrying values as of March 31, 2022 and December 31, 2021, due to their short-term nature. The Company records long-term debt and long-term debt due to related parties on an amortized cost basis.

At March 31, 2022, Level 3 instruments consist solely of Private Placement Warrants. The Private Placement Warrants are fair valued using the Black Scholes Option Pricing Model at every reporting period. For the three months ended March 31, 2022, the Company recognized a gain to the condensed consolidated statement of operations resulting from a decrease in the fair value of warrants of approximately $1.4 million, presented as other income (expense) on the accompanying condensed statement of operations. The Private Placement Warrants are considered to be a Level 3 fair value measurements due to the use of unobservable inputs.

At December 31, 2021, Level 3 instruments consist solely of the Company’s embedded derivatives in the Company’s convertible notes. The Company classifies its financial instruments within Level 3 of the fair value hierarchy due to lack of market data. For the three months ended March 31, 2022, the Company recognized a loss of $3.8 million to the condensed consolidated statement of operations resulting from an increase in the fair value of derivative liabilities prior to derecognition of the convertible notes on Closing Date, presented as other income (expense) on the accompanying condensed consolidated statement of operations. See “Note 12 – Borrowing Arrangements” for details on the valuation of the embedded derivative in the convertible notes.

The fair value of the convertible notes was $99.0 million as of December 31, 2021. The carrying value of the convertible notes of $105.8 million, net of $38.6 million of unamortized debt discount and issuance costs, was recorded as long-term debt totaling $16.2 million, long-term debt—related party totaling $16.7 million, and short-term debt totaling $34.3 million as of December 31, 2021. The Company’s convertible notes are no longer outstanding at March 31, 2022.

There were no transfers between Level 1, Level 2 or Level 3 fair value hierarchy categories of financial instruments for the three months periods ended March 31, 2022 and 2021.