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Fair Value Measurement of Assets and Liabilities | 12 Months Ended
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Dec. 31, 2021
Fair Value Disclosures [Abstract] |
Fair Value Measurement of Assets and Liabilities | Fair Value Measurement of Assets and Liabilities Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). A fair value measurement reflects the assumptions market participants would use in pricing an asset or liability based on the best available information. These assumptions include the risk inherent in a particular valuation technique (such as a pricing model) and the risks inherent in the inputs to the model. The Company classifies inputs to measure fair value using a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) and is defined as follows: Level 1: Pricing inputs are based on quoted market prices for identical assets or liabilities in active markets (e.g., NYSE or NASDAQ). Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2: Pricing inputs include benchmark yields, trade data, reported trades and broker dealer quotes, two-sided markets and industry and economic events, yield to maturity, Municipal Securities Rule Making Board reported trades and vendor trading platform data. Level 2 includes those financial instruments that are valued using various pricing services and broker pricing information including Electronic Communication Networks and broker feeds. Level 3: Pricing inputs include significant inputs that are generally less observable from objective sources, including the Company’s own assumptions. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There have been no transfers of assets or liabilities between fair value measurement classifications during the years ended December 31, 2021 or 2020. The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis in accordance with the authoritative guidance for fair value measurements as of December 31, 2021 and 2020 (in thousands):
| December 31, 2021 |  | December 31, 2020
| Total Fair Value |  | Level 3 |  | Level 1 |  | Total Fair Value |  | Level 3 |  | Level 1
Assets |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  |  |  |  |  |  |  |  |  |
Money market funds | $ | 126 |  |  | $ | — |  |  | $ | 126 |  |  | $ | 126 |  |  | $ | — |  |  | $ | 126 |
Total assets | $ | 126 |  |  | $ | — |  |  | $ | 126 |  |  | $ | 126 |  |  | $ | — |  |  | $ | 126 |
Liabilities |  |  |  |  |  |  |  |  |  |  |
2025 Notes |  |  |  |  |  |  |  |  |  |  |
Interest make-whole payment | $ | 926 |  |  | $ | 926 |  |  | $ | — |  |  | $ | 4,898 |  |  | $ | 4,898 |  |  | $ | — |
Total liabilities | $ | 926 |  |  | $ | 926 |  |  | $ | — |  |  | $ | 4,898 |  |  | $ | 4,898 |  |  | $ | — |
The fair value of the interest make-whole payment derivative liability was determined using a Monte Carlo model with the following key assumptions:
| December 31, 2021 |  | December 31, 2020
Volatility | 50 | % |  | 50 | %
Stock price | $5.83 per share |  | $15.47 per share
Credit spread | 15.93 | % |  | 19.25 | %
Term | 3.34 years |  | 4.34 years
Dividend yield | — | % |  | — | %
Risk-free rate | 1.02 | % |  | 0.30 | %
The following table sets forth a summary of changes in the fair value of Level 3 liabilities for the twelve months ended December 31, 2021 (in thousands):
| Balance as of December 31, 2020 |  | Additions |  | Conversions |  | Change in fair value |  | Balance as of December 31, 2021
Liabilities: |  |  |  |  |  |  |  |  |
Interest make-whole payment | $ | 4,898 |  |  | $ | — |  |  | $ | (146) |  |  | $ | (3,826) |  |  | $ | 926 |
The Company evaluated the 2025 Notes under ASC 815, Derivatives and Hedging, and identified an embedded derivative that required bifurcation. The embedded derivative is an interest make-whole payment The estimated fair values of the interest make-whole derivative liability at December 31, 2021 and December 31, 2020 were determined using significant assumptions which include an implied credit spread rate for notes with a similar term, the expected volatility and dividend yield of the Company’s common stock and the risk-free interest rate. Changes in the fair value of the interest make-whole payment are included in the Company’s consolidated statement of operations for the current fiscal year within other income (expense), net. During the year ended December 31, 2021, certain holders of the 2025 Notes converted an aggregate of approximately $5.0 million in principal amount of the 2025 Notes into shares of the Company’s common stock in accordance with the terms of such notes and a portion of the embedded derivative was settled in shares of the Company’s common stock resulting in $0.1 million of the derivative liability being extinguished upon conversion. As of December 31, 2021 and 2020 the embedded derivative had a fair value of $0.9 million and $4.9 million, respectively. For the years ended December 31, 2021 and 2020 the Company recorded to other income (expense), net, on the consolidated statement of operations a $3.8 million gain and $0.6 million loss, respectively, on the change in fair value. During the years ended December 31, 2021 and 2020, there were no transfers between the levels within the fair value hierarchy. Other Financial Instruments The Company’s financial assets and liabilities are carried at fair value or at amounts that, because of their short-term nature, approximate current fair value, with the exception of the 2025 Notes. On May 12, 2020, the Company issued $180.4 million in aggregate principal amount of 2025 Notes, and restructured its outstanding debt as described further in Note 6. Debt. The Company elected to carry its 2025 Notes at amortized cost adjusted for changes in fair value of the embedded derivative. It is not practicable to determine the fair value of the 2025 Notes due to the lack of information available to calculate the fair value of such notes. As of December 31, 2021, $161.9 million in principal amount of the 2025 Notes remain outstanding.

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- Definition The entire disclosure of the fair value measurement of assets and liabilities, which includes financial instruments measured at fair value that are classified in shareholders' equity, which may be measured on a recurring or nonrecurring basis. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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