Earnout Liability

3 Months Ended

Mar. 31, 2024

Disclosure Of Earnout Liability [Abstract]

In addition to the shares issued upon closing of the Business Combination (see Note 1), additional contingent shares (“Earnout Shares”) are payable to each holder of common stock and/or options receiving consideration in the Business Combination, in the amounts set forth below:


(a)			If the closing price of the Company’s common stock equals or exceeds $150.00 per share for any 20 trading days within any consecutive 30-trading day period that occurs after February 10, 2022 and on or prior to February 10, 2025, the Company will issue to each holder of common stock that is entitled to Earnout Shares a number of shares of common stock equal to such holder’s pro rata portion of 700,000 shares.


(b)			If the closing price of the Company’s common stock equals or exceeds $175.00 per share for any 20 trading days within any consecutive 30-trading day period that occurs after February 10, 2022 and on or prior to February 10, 2025, the Company will issue to each holder of common stock that is entitled to Earnout Shares a number of shares of common stock equal to such holder’s pro rata portion of 600,000 shares.

The Company concluded the Earnout Shares meet the criteria for liability classification due to the existence of contingent settlement provisions that could result in holders receiving differing amounts of shares depending on the Company’s stock price or the price paid in a change of control. Because the settlement is not solely determined by the share price of the Company (that is, the share price observed in or implied by a qualifying change-in-control event), but also by the occurrence of a qualifying change-in-control event, this causes the Earnout Shares to not be indexed to the Company’s own shares, resulting in liability classification. Upon the closing of the Business Combination, the Company recorded these instruments as liabilities on the condensed consolidated balance sheet at fair value and will recognize subsequent changes in fair value in earnings at each reporting date. The fair value of the earnout liability was determined using a Monte Carlo valuation model that utilizes significant assumptions, including expected volatility, expected term, and risk-free rate, to determine the probability of achieving the common share price milestones.

The following table summarizes the assumptions used in estimating the fair value of the earnout liability at each of the relevant dates:


	March 31, 2024			December 31, 2023
Stock price	$	2.78		$	3.14
Expected volatility	117.0		%	117.0		%
Risk-free interest rate	5.32		%	5.32		%
Expected term (in years)	1.0			1.2
Expected dividend yield	0		%	0		%

Stock price: the stock price was based on the closing price as of the valuation date.

Expected volatility: the volatility rate was determined using the historical volatility of the Company’s stock price, corresponding to the expected term of the awards.

Risk-free interest rate: The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of issuance for zero-coupon U.S. Treasury notes with maturities corresponding to the expected three-year term of the earnout period.

Expected term: The expected term is the remaining term of the three-year earnout period.

Expected dividend yield: The expected dividend rate is zero as the Company currently has no history or expectation of declaring dividends in the foreseeable future.

As of March 31, 2024, the balance of the earnout liability was approximately $0.1 million. For the three months ended March 31, 2024, there were no gain or loss in the condensed consolidated statement of operations and comprehensive

income (loss) for the change in fair value of the earnout liability. For the three months ended March 31, 2023, the Company recorded a gain of $0.8 million in the condensed consolidated statement of operations and comprehensive income (loss) for the change in fair value of the earnout liability.